The group purchase total is not the rebate base

Calder Industrial Supply / March 2 opening view and April 13 exclusivity update

Complete the decisions first. The seller's $12.240m AP total includes another entity, freight and a year-end return credited in January. Contractual eligible purchases are $10.000m. The earned rebate is $0.150m, leaving a $0.300m earnings correction. Revised adjusted EBITDA is $3.600m and maximum permitted EV is $21.600m.

Completed solution workbook · Learner workbook

1. An opening price decision, not automatic acceptance

Management's initial adjusted EBITDA is $3.900m. The seller's $25.000m ask implies 6.41× and requires $13.325m equity, exceeding both the 6.00× multiple limit and the $12.000m equity cap.

A defensible opening action is to reprice to no more than $23.400m, conditional on earnings and working-capital diligence. A lower opening offer can reflect negotiation posture and unverified financial quality. A pause or pass can also be reasonable if linked to a stated concern. There is no observed fair-value range or return model to justify pretending a particular lower bid is uniquely correct.

Recognize the difference between the maximum permitted EV and the offer you choose. The former is deterministic; the latter is judgment. An opening price of $25.000m is outside the supplied authority. At the $23.400m ceiling, equity is $11.725m and headroom is only $0.275m.

Case continuation: regardless of the learner's opening recommendation, the later scenario stipulates a signed March 20 LOI at $23.400m and exclusivity through May 15. The April 13 decision is therefore a re-trade, pause or walk decision against that signed LOI. It does not assume the learner actually chose or approved it.

2. Resolve the three reconciling items

Cross-check independently: merchandise invoices of $10.320m less posted merchandise credits of $0.260m and accepted but later-posted returns of $0.060m equal $10.000m. These are two routes to the same contractual population. Do not subtract the $0.260m twice: it is already included in both the net AP history and the statement activity.

The program applies only to CIS-44082. The related Field Services entity is outside the acquisition and program. Shared purchasing administration does not amend a legal-entity/account rule. Freight is an invoice charge, not eligible merchandise. The January memo's posting date does not override its December 29 acceptance date.

The tier is applied to actual eligible merchandise and to all eligible volume. Because $10.000m is below $12.000m, the correct rate is 1.5%:

Earned rebate = $10.000m × 1.5% = $0.150m
Unsupported booked credit = $0.450m − $0.150m = $0.300m

The controller's email is a seller assertion, not an admission or independent verification. It supports examining the account-combination argument. The written supplier terms reject that argument and provide no waiver. A forecast is also excluded from actual qualifying purchases.

The close note's $0.450m accrual is 3.75% of a $12.000m threshold-volume placeholder, below management's $12.300m November plan. It does not establish actual eligible volume. Applying the upper rate to the reconciled $10.000m would produce $0.375m; applying it to the pooled $12.240m would produce $0.459m. Neither follows the written account and tier terms.

3. Separate the earnings correction from settlement

All retained eligible merchandise was sold in FY2025. Increasing COGS by $0.300m reduces reported EBITDA from $3.600m to $3.300m and the rebate receivable from $0.450m to $0.150m. Retain the accepted ERP and owner adjustments, totaling $0.300m, to reach $3.600m corrected adjusted EBITDA.

The returned merchandise was already removed from inventory and merchandise-cost records in December, with a return receivable recorded then. The January credit memo settles that receivable. It affects the rebate-volume cut-off, but creates no additional $0.060m merchandise-COGS correction.

Waiting for cash cannot make an unsupported amount earned. The seller's suggested closing-working-capital treatment also does not remove the historical earnings effect. No agreed peg, closing statement or purchase-agreement definition is supplied. Do not automatically deduct another $0.300m from price as a contractual NWC adjustment.

4. Update the signed-LOI economics

At the $23.400m signed LOI price, the entry multiple becomes 6.50× and sponsor equity becomes $12.700m. The $0.300m earnings change lowers assumed debt by $0.975m. The 6.00× multiple cap requires a $1.800m reduction in EV; it binds before the equity cap.

A price of $22.700m solves only the equity limit. It still exceeds the multiple ceiling. At $21.600m EV, equity is $10.900m under the stipulated debt draw. Neither that headroom nor the multiple proves the deal is attractive.

5. Illustrative purchase-based rebate allocation

The correcting journal reverses $0.300m from the Q4 posting. That leaves Q4 reported EBITDA at $1.160m, or 12.2%. This is the corrected ledger presentation, not a fully comparable quarter-by-quarter margin series.

The earned $0.150m rebate covers a full year. For comparison, allocate it across quarters using each quarter's share of final eligible merchandise purchases: $2.160m, $2.460m, $2.640m and $2.740m. Allocate $0.0324m, $0.0369m, $0.0396m and $0.0411m respectively. Remove the remaining full-year $0.150m from Q4 before allocating these amounts. This analytical allocation leaves annual EBITDA unchanged.

Allocation limit: DOC-05 supports original purchase months for the returns and full-year sell-through of retained merchandise. It does not establish when that merchandise entered quarterly COGS. These results illustrate a purchase-based allocation; quarterly inventory/COGS matching remains unverified.

Under this allocation convention, reported Q4 margin is 11.1%, versus 8.5%, 9.4% and 9.6% in Q1–Q3. Q4 remains about 1.5 percentage points above Q3. After the accepted add-backs, Q3 and Q4 adjusted margins are 11.3% and 11.4%. That small gap is conditional on the allocation convention; the evidence does not establish fully comparable quarterly earnings or explain the remaining pattern.

6. Explain the annual growth and challenge the forecast

Even after correction, adjusted EBITDA rises 27.7%, from $2.820m to $3.600m, on 7.6% revenue growth, from $31.600m to $34.000m. Adjusted margin rises from 8.9% to 10.6%.

The accounts mechanically explain the change: corrected gross profit rises $0.720m while cash operating expenses rise $0.120m, and the new accepted ERP adjustment adds a further $0.180m to adjusted growth. They do not establish why merchandise margin improved, whether operating costs can keep growing slowly or whether these earnings persist. Product mix, pricing, cost allocation, period cut-off and accruals remain useful follow-up areas.

The November 30 main-account forecast was $12.300m. Through November, merchandise less then-posted credits was $9.100m, implying $3.200m of December volume to reach that plan. The later return attribution reduces final eligible January–November volume to $9.080m. Using that final basis for a retrospective comparison, the implied December requirement is $3.220m versus $0.920m actually achieved.

The retrospective $3.220m requirement is 3.5 times the final September–November average of $0.920m per month. No order support or explanation for that step-up is supplied. This challenges forecast credibility; it is not proof of intent or a claim that the December return was known on November 30.

Q4 eligible purchases of $2.740m annualize to $10.960m, still below the $12.000m threshold. Even an extrapolation of the latest quarter does not support assuming the upper rate. Annualizing one quarter is not a verified forward forecast.

7. Close the calculation, keep the diligence open

Issue

E-01 / Aster annual incentive accrual

Reference links

Q-07 is the diligence request. E-01 is the resulting buyer finding. QOE-03 is its earnings-bridge adjustment. These references identify the same issue at different points in the work.

Evidence

Supplier terms and account limitation; seller AP export; supplier activity; RA-251229; CM-260115; original journal and seller correspondence.

Finding

$10.000m qualifies for the 1.5% tier. The $0.450m booked accrual exceeds the $0.150m earned benefit by $0.300m.

Buyer treatment

Correct COGS and rebate receivable once; resize debt and price limits. Treat no additional return-inventory adjustment as outstanding.

Seller position

Group volume earns the upper tier; collection or closing NWC resolves the balance. The written terms and cut-off records do not support that position.

Disposition

Quantified for this screen. Seller acceptance and a posted correcting entry are not evidenced. Q-08 remains open; broader earnings diligence is incomplete.

8. One defensible five-field investment update

Pause is defensible if the unsupported forecast and disputed accounting create too much uncertainty to name a revised bid now. State the known price ceiling and evidence needed to resume. Pass is defensible if the seller will not accept a compliant price or the control concerns exceed the buyer's risk tolerance. A lower price than $21.600m can be defensible without claiming it is uniquely required.

Hold the LOI price unchanged breaches both limits under the supplied evidence. A waiver, extra debt, additional equity, future synergy or a higher future rebate cannot be invented to make it fit.

Searcher / owner-operator condition: before committing, define the seller's transition and the roles the buyer must fill. Q-12 can help establish the current management team and replacement-role costs. Those costs and the buyer's operating capability remain unquantified; the accepted owner personal-expense addback does not settle them. If that is the critical risk, prioritize Q-12 among your two or three requests.

9. What the evidence cannot establish

The record does not establish fraud, a final NWC purchase-price deduction, a sustainable forward earnings base, customer retention, a complete QoE, an IRR or a committed financing package. FY2024 vendor benefit is an aggregate line; it does not prove the same account terms applied then. The $21.600m ceiling is a mandate calculation, not fair value.

10. Review your work

Money is checked within ±$0.0005m and multiples within ±0.005×. Trace each calculated answer back to its population, unit and timing. Distinguish $3.300m corrected reported EBITDA from $3.600m corrected adjusted EBITDA. The latter equals the original reported amount by coincidence, so label the measure.

For judgment, compare all five fields with the example. A complete answer states a decision, uses the source evidence, respects the mandate, gives a meaningful condition and names an actual unresolved question. The example is one defensible response, not a prescribed wording.