Diligence tactics when the seller will be a supplier

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 Indiana University at Bloomington
in Washington, DC, USA

2yrs ago

Diligence tactics when the seller will be a supplier

I'm a self-funded searcher that just went under LOI for a distribution company. ~10% of revenue comes from products manufactured by a second company (a) that is owned by the seller and his brother, and (b) at which the seller will have some day-to-day responsibilities post-close.

Have others run into similar situations and if so, how have you approached diligence for this dynamic? I know to look for things like preferential pricing, past/current contracts, dig deep for seller motivation. But other suggestions and real-world experience would be great to hear, in comments or DMs. Thanks!

1 Like

105 Views

reply by a searcher 2yrs ago
from The University of Texas at Austin in Chicago, IL, USA

ask them to roll 10-20% equity or seller finance portion of the deal. it goes a long way in aligning incentives and ensuring they play good.... in the meantime, once you've got the keys, you can work on diversifying suppliers to manage out that risk

reply by a searcher 2yrs ago
in Cyprus

I would try to get the current product pricing fixed as long as possible, and make a good contract that covers how they can raise the prices when you own the disctribution company. Also +1 on what Mamta said, try to get the seller involved in the future success of the business aswell.