$50MM to $100MM acquisition - GP/Searcher Structure

searcher profile

July 26, 2024

by a searcher from Universitat Pompeu Fabra in Manila, Metro Manila, Philippines

Hello everyone,

I seek expertise in structuring bigger deals in the $8 to 10MM EBITDA range at a 2X EBITDA leverage.

The cap stack would be equity from LP and debt from a bank.

What do you think of this structure, and have you seen it before? Would this be considered an "independent sponsor" deal?

The searcher and the lead investor (family office) become GP in the deal, raise money from several LPs, and earn from carry.

Then, the searcher becomes part of the board and the CEO, receiving a salary plus a bonus based on performance. Eventually, after integrating, he replaces himself with another CEO but remains on the board as GP.

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commentor profile
Reply by a searcher
from The University of Chicago in San Antonio, TX, USA
$8-10M of predictable and repeatable (and legit) EBITDA? If so, you’re be competing with traditional PE and established independent sponsors in deals usually represented by sophisticated advisors/bankers often in bid/auction situations. These usually trade well above 2X & with quite a bit of competition … deal structure you’ve proposed isn’t unreasonable, but in our world we rarely see 2x (even for messy, ugly businesses!) … always happy to chat - feel free to DM.
commentor profile
Reply by a searcher
from Massachusetts Institute of Technology in Minneapolis, MN, USA
Yes, this sounds like an independent sponsor deal with the twist that the family office is part of the GP rather than one of the LPs. Is the thought that the searcher being able to tell potential targets that they have a lead investor locked in during the process is worth a share of the carry or would the family office add value in some other way (e.g. handling the fundraising, supporting deal flow, providing advice)?
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