Are the "second investors" limited to the search phase investors?

searcher profile

May 24, 2019

by a searcher from INSEAD in São Paulo, State of São Paulo, Brazil

What I mean as "second investors" are the additional investors that will finance the acquisition per se

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Reply by an admin
from Massachusetts Institute of Technology in New York, NY, USA
In a traditional fund structure, the contracts are set up so that search phase investors have the right of first refusal. Generally what happens is that the deal goes around the table twice,

round 1:
all search phase investors can put up to their pro-rata share

round 2:
any search phase investors can take the pro-rata share of the investors who passed in round 1

If any unfunded equity remains on the table after round 2, then the searcher can try to raise outside capital.
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