Acquiring company without having raised traditional fund - economics

searcher profile

May 01, 2023

by a searcher from University of Maryland - Robert H. Smith School of Business in Washington, DC, USA

Hi all,

I know that for traditional search you would receive a salary, and 25% of equity across 3 tranches - 1/3 on acquisition, 1/3 over time, 1/3 for hitting pre-defined performance.

However, what if you found a company before raising a traditional fund, what would the search fund entrepreneurs equity (and salary) be if investors funded the entire acquisition. I'm assuming it would be higher than traditional search?

Additionally, are investors willing to invest along-side alternative financing (ie https://www.boopos.com/) that is similar to seller financing but has the first lien position on the assets of the target business?

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commentor profile
Reply by a searcher
from University of Pennsylvania in Seattle, WA, USA
SIG's self funded guide is the best source I know of in this area.. . https://www.searchinvestgroup.com/study It sounds like you aren't quite traditional and not quite self funded. Between this and the Stanford primer on traditional, you should be able to put something together to take to investors.
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Reply by a searcher
from ESSEC Business School in Torrance, CA, USA
When it comes to lending, you have to look thoroughly on the terms. I was advising a micro-PE and they were evaluating Boopos. The deal independently was very interesting but the moment you bring in interest payments for Boopos - it become unsustainable to execute - in high interest environment, you have to be very careful on your debt obligations
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