Cash before interest
Saltire’s $15.8 million of adjusted free cash flow looks like the most useful input in Drilling Tools’ acquisition arithmetic. Yet acquisition debt interest is absent from that figure. The company defines it as adjusted EBITDA less gross capital expenditure. With approximately $80 million of cash consideration expected to use new debt and an existing credit facility, the measure describes earning capacity after capital spending. It does not describe the cash left for shareholders after creditors are paid.[1]
The distinction starts with the starting line of the calculation. EBITDA already excludes interest; subtracting capital expenditure does not put that expense back. I would bridge the target’s disclosed operating capacity to the combined company’s cash after financing costs. Placing $15.8 million at the end of that bridge effectively assumes no financing cost. Cash calculated alongside the eventual funding terms need not provide the same amount of room.[1]
What an annualized margin carries
The second sensitivity is the period behind the numbers. Saltire is presented with revenue of $50.4 million, adjusted EBITDA of $22.5 million and a 45% margin. These are annualized estimates derived from recent monthly performance. A completed year’s cash-flow statement supplies a different baseline. Sustaining the recent pace supports the acquisition case; seasonal demand or changing investment requirements could move that starting point. A high margin alone does not fix the amount available for debt payments.[1]
Eastern Hemisphere revenue is expected by management to rise from about 18% to 40% on a pro forma basis. Saltire’s customers have limited overlap with the existing network. This provides an identifiable channel for cross-selling existing tools to new customers. The other side of a broader footprint is the equipment and working capital required to serve those customers. I would not value a larger geographic revenue share directly as a cash gain: the economic contribution depends on the capital allocated to the sale as well as its amount.[1]
Fixed shares, variable value
The other leg of the consideration is a fixed 17.4 million shares. Under the company’s agreement, the average price over the 20 trading days before closing determines their dollar value, but not their number. The equity consideration therefore changes in value with the share price while the number of new shares shared with existing owners remains fixed. The selling Loggie family is expected to hold approximately 30% of the combined company. That structure gives sellers exposure to subsequent performance without removing the cash financing burden.[1]
For me, the acquisition arithmetic becomes meaningful when both commitments appear together: fixed new shares and interest-bearing cash financing. Management’s case for a high-margin business with complementary customers may provide a strong operating rationale. But the relevant measure of what the price buys is cash after capital expenditure and financing, rather than the size of annualized EBITDA alone. The transaction outlines a commercial story. The limits of the $15.8 million measure show which further cost must be deducted in translating that story into cash for shareholders.[1]