Hi all,
I am exploring buying a business with a financial backer and would greatly value any insights/thoughts/criticisms into the high-level deal structure below. Recognize this is quite different from the traditional search model but I have the financial partner lined up and the simplicity seems to make sense for me. Perhaps as a searcher/operator, I am taking on an unfair share of risk, but get a material shareholding up front and will also be looking at an 'enduringly profitable', low-risk business to acquire.
(Searcher / Operator)
- Finds business
- Acquires business
- Runs business
- Owns 50% of business
- Receives average market salary
- Receives distributions once acquisition capital/loan is paid back to financial partner
Financial partner - Provides acquisition capital (50% and 50% funded by bank) - Acquisition capital from financial partner provided as an interest-free loan - Has a Board seat - Owns 50% of business - Receives loan repayments and once loan is repaid, received distributions.
Questions/considerations
- Personal guarantees for bank debt (likely with operator?)
- What happens if further capital required (perhaps agree that financial partner will make available an additional % up to x?)
- Key shareholder agreement terms (key decisions, dispute resolution, right of first refusal, shotgun clause)
- Other considerations?
The other piece of context is that we wouldn't necessarily be looking to double value and sell within 5-8 years. The more likely pathway forward if the first acquisition is successful would be to buy another business every 3 years with a long-term hold view.
Many thanks to the community, so many great learnings and insights from being on this platform.
Cheers,
Baz