The buyer still needs somebody to run the shops

## Start with the work that continues

The three franchised outlets had customers, locations and a trading history we understood well enough to take seriously. Their owners wanted to leave daily management. The asking price of ₹8.4 crore was supported by a seller-adjusted EBITDA figure of ₹1.6 crore. Our commercial colleagues saw an opportunity to bring useful shops into the company, and they worried that a prolonged discussion would lose the transaction. I understood the urgency. I also wanted to know who would perform the work that the proposed earnings adjustments appeared to remove.

Two add-backs were especially important for our plan: ₹42 lakh of management cost and ₹28 lakh of occupancy cost. The seller considered them removable in its adjusted account. We expected to need managers after the owners left, and continuing occupancy obligations remained under the arrangements we were considering. Retaining those ₹70 lakh in the buyer's planning view left ₹90 lakh of earnings on that basis. The arithmetic was simple. The harder question was whether the assumptions described a business we could actually run after completion.

I did not begin by accusing the seller of presenting a false number. An adjusted figure has a purpose and assumptions that need to be understood. A cost associated with an owner may change under a different buyer. A large purchaser might absorb some work into existing capacity; another might need to hire. The relevant question for us was what our own operating plan required. Calling every add-back wrong would have been as unhelpful as accepting every one because it appeared in a prepared sales account. We needed to connect each material adjustment to a feasible future arrangement.

Operations helped make that future concrete. The shops would still need opening responsibility, staff supervision, local decisions and coordination with the wider business. Some functions could be shared, but sharing work did not mean it consumed no capacity. Occupancy also needed a proper account under the proposed terms. Finance could challenge the earnings treatment while the relevant professional advisers examined the underlying arrangements. I wanted the recommendation to reflect those contributions before a valuation multiple made the seller's starting figure feel like an objective fact about the price.

## Negotiate from a usable operating account

We spent ₹37 lakh on due diligence and professional review, reported separately from the eventual purchase consideration. That expense matters to the story because the revised view did not arrive without work. It also did not entitle us to complete the transaction merely to justify the effort already spent. The company needed to remain willing to walk away if the price and obligations did not fit. A completed review can be valuable even when it leads to rejection, but in this case the CEO supported further negotiation on a more explicit operating basis.

The seller had a serious counterargument. Our wider organisation could provide support that three standalone outlets had to arrange themselves. The locations and established customer relationships also had value beyond one year's earnings. We considered those points rather than insist that the transaction must fit a single mechanical multiple of ₹90 lakh. Finance should make the earnings account more useful without pretending that it is the whole valuation. Assets, liabilities, lease arrangements, integration needs, growth possibilities and alternatives also affect the choice. Their relevance does not permit us to omit costs we still expect to incur.

We ultimately negotiated a ₹6.1 crore price for all three outlets, with board approval and completion in September 2024. I do not describe the ₹2.3 crore difference from the asking price as a realised saving. The initial price was a proposal, not expenditure the company had already committed and then recovered. The agreed consideration reflected the negotiation and the transaction the parties were prepared to complete. A claim of savings would make the finance contribution sound more dramatic while obscuring the real question: whether the acquired undertaking justified the amount and obligations we accepted.

The separate ₹37 lakh diligence expense remained in the transaction account. Integration costs needed their own treatment as the shops joined our operating arrangements. We also had to preserve a clear distinction between the purchase price, the cost of completing and integrating the acquisition, and the trading measures used to follow the outlets afterwards. Combining them casually can produce a superficially attractive payback story without a consistent basis. I wanted the board to see the chosen commitment and the work still required, rather than a conclusion that negotiation had already made the acquisition successful.

## Let the acquired business develop an actual history

In the twelve months to September 2025, the outlets recorded ₹12.4 crore sales and ₹78 lakh direct operating contribution before central costs, financing, depreciation, tax and separately tracked integration costs. That is a defined management measure. It is not the group's statutory profit, and it does not by itself calculate a return on the acquisition. The result helped us examine the stores after completion, but it needed to sit alongside the other costs and obligations. A positive local contribution cannot settle every question about the enterprise value of owning the shops.

The first year also does not prove which negotiating position had been correct in every respect. Trading conditions change, managers learn and integration affects how the business operates. The buyer's ₹90 lakh planning view was a view of expected earnings under specified assumptions, not a promise that the next period would reproduce it exactly. We needed to understand differences and improve the operating plan. Treating any departure as evidence of failure, or any positive number as confirmation of success, would turn a useful review into a defence of positions taken before completion.

For directors, I think the most useful questions concern the continuing work. Are the management arrangements functioning as intended? Which shared services have capacity, and which have acquired new demands? Have the occupancy assumptions remained valid? Are integration costs visible, and is the customer proposition benefiting from the change in ownership? Those questions keep the board connected to the acquisition thesis without asking it to manage the outlets. They also give management room to report what needs correction instead of protecting a neat account of the original decision.

The lesson I would bring into another acquisition is to examine the replacement operating model before the headline earnings number becomes the anchor for every conversation. The buyer still needs somebody to run the shops. That ordinary observation can have a material financial consequence when an owner has been doing work that an adjusted account removes. Good diligence should make the ongoing undertaking easier to understand, including where the buyer expects genuine efficiencies and where it will continue paying for necessary work. The price discussion becomes more credible when it begins from that practical account rather than hoping the acquisition itself will make the omitted costs disappear.