Creative Deal Structure Brainstorm

Member resources:

Frequent asked questions:

What is Searchfunder.com?

Searchfunder.com is an online community of searchers, investors, lenders, brokers and other professionals. Over 80% of those involved in searchfunds maintain a Searchfunder account to help them network, hire, and mentor others.

What are the benefits of membership?

In addition to accessing the most active online network of business buyers, Searchfunder licenses research that is simply not cost effective for individuals. Access over 15,000 industry reports and 50,000 transaction financials. You also get monthly credits for contact information for your company sourcing campaign with the option to purchase more at drastically discounted rates. Searchfunder has pre-purchased access from these data providers in order to empower individual buyers and to help searchers level the playing field versus private equity.

Do you have deals?

While we are primarily a buy-side network, we do have hundreds of brokers that regularly post deals to the community.

Can I find an internship on Searchfunder?

Absolutely! We have the industry's largest intern job board. If you are considering a search, the first step is to help another business buyer so you can hit the ground running.

What does it cost?

Searchfunder is a subscription service. We offer flexible monthly, annual and lifetime memberships.

Monthly

$79 / month

Annual

$19 / month

Lifetime

$432 / once

Those who maintain an account with us for over 4 continuous years are permanently added to the community without the need for a membership.

Do I need an MBA to join?

While a large number of our members come from dedicated programs at Harvard Business School, Stanford GSB, Chicago Booth, and other top programs, searching is no longer reserved for the elite. With the current abundance of dry powder in private equity, and an increasing number of business owners reaching retirement age, good deals rarely go unfunded.

Post a question, deal, job, etc...

Make a post...

Complete registration to post.

by a searcher from Adler School of Professional Psychology
in Marysville, WA, USA

1yr ago

Creative Deal Structure Brainstorm

Hi everyone! I'm an independent sponsor, and the investor that I'm partnering with for a deal that I have under LOI is looking to change the deal structure that the seller and I agreed on from a small percentage of equity rollover and the rest cash at close to a percentage of equity rollover and the cash paid out over three years. It wouldn't be an earn-out, per se; the business would just have to maintain the same revenue level in order for the seller to receive that cash.

From the investor's perspective, the business is too dependent on the seller to give them a big wad of cash up front, which I completely understand. From the seller's perspective, this is a massive change and a huge decrease in cash at close, and he's not thrilled - which I also understand.

I'm hoping to leverage the collective creativity of Searchfunder to come up with some alternative structures that would protect the investor's downside if the seller were to abandon ship once he gets his cash and that keep the deal terms as close to the original as possible. Obviously, we're going to have to meet somewhere in the middle, but I'm open to any and all ideas of what you've seen work during this type of dilemma!

0 Likes

80 Views

reply by a professional 1yr ago
from Bentley College in Miami, FL, USA

One option to consider is a tiered payout structure that ties a portion of the deferred cash to specific KPIs, such as revenue retention or operational handoff milestones. This can give the seller more confidence that they’ll receive the full value while protecting the investor's downside.

Another possibility is implementing a seller consultancy agreement where part of the deferred cash is tied to the seller’s active involvement in the business for a defined period, ensuring smoother continuity. Alternatively, a performance holdback—a set amount reserved in escrow contingent on the business maintaining agreed-upon metrics—could bridge the gap.

If structuring gets tricky, leveraging third-party expertise to align everyone’s incentives while safeguarding all sides can make a big difference. Resources like DueDilio can connect you with specialists in deal structuring to refine the approach.

redacted

reply by a professional 1yr ago
from University of Michigan in Detroit, MI, USA

Hi Anon, your investor's concerns are valid (you likely share some of those concerns). The exact deal structure will depend on the circumstances. But you have a number of leavers to pull. First, recognize that your investor essentially wants the seller to loan the business a portion of the purchase price at zero percent. Understandably, the seller's not too happy about that. One easy compromise would be to ask the seller to sign a promissory note at 7%, which would at least compensate the seller for the time value of money (with forgiveness if the revenue drops). That aside, there is some mix of rollover equity, cash on close, and seller note that may get you to where you want to go. The seller wants as much cash on close as possible, but you can sweeten a less cash on close deal by offering perks (or penalties depending on your leverage) tied to the seller's involvement. For example, you can have a call right (and agreed purchase price) on the seller's rollover equity. You could also propose a formal earnout (although your post suggests this isn't on the table). Hopefully that gets you thinking. If you would like to discuss things in more detail, let me know. You can reach me at redacted