Does anyone have guidance on Operating Partner Economics?

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April 09, 2021

by a searcher from University of Pennsylvania - The Wharton School in New York, NY, USA

I'm advising a fundless sponsor (with capital access to family officers) for acquisition diligence and general operating partner support. The sponsor is leveraging my vertical experience and industry relationships. Would like to understand creative economic models with sponsor are reasonable.

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commentor profile
Reply by an investor
from The University of Chicago in Chicago, IL, USA
I would suggest that you position yourself relative to the sponsor and not relative to the transaction. Presumably the sponsor cannot assemble the equity without your involvement / support. If so, I would suggest that you link your economics to the sponsor's economics (closing fee, mgmt fee, promote, etc.) and not the EV. Presumably your involvement is key and thus, you should win in tantum to the sponsor.
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Reply by an investor
from Pennsylvania State University in New York, NY, USA
general transaction fee is reasonable for diligence support with some type of participation in form of advisory shares / promote if you will have continued involvement with business. size dependant on transaction size/involvement. expense coverage/protection for reasonable expenses on any up front work. best for all to have alignment and structure with backend upside.
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