Teamshares vs Search Funds

searcher profile

August 01, 2024

by a searcher from INSEAD in Singapore

Hi All - I recently came across TeamShares (https://www.teamshares.com), which offers an interesting variation on the SF model.

I wondered if anyone here could comment on precisely how they structure their transactions?

At a 60,000ft level, they talk about transitioning 80% of ownership to employees over 20 years.

They mention acquiring companies slightly below market value, whilst I'm assuming their economics are driven by "lending" the business money (a first-lien) at a floor interest rate, which the firm "repays" to support this transition. I imagine there must be some form of revenue royalty arrangement in there as well, for all the system / centralised benefits they offer. Can someone confirm this?

Also, how do the employees monetise the "shares" they receive in the business, as they suggest no onward interest to sell the business?

If anyone can provide insight, that would be great - and if someone would prefer to share that privately, then do feel free to reach out on redacted Cheers!

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commentor profile
Reply by a searcher
from Northwestern University in Chicago, IL, USA
Their idea is that they eventually sell back their shares to the employee owners over time which is how they exit. They are industry agnostic and buy anything from a home services company to a mom and pop restaurant. They also are rolling out a lot of service companies to provide banking, insurance, etc. for these companies to help further monetize.

It's not a variation of the SF model as they source and fund their own deals and then hire operators. Operators start with one company and may eventually run 2-3. From my understanding comp is not comparable to PE operators at places like Alpine.
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Reply by an investor
from Ivey Business School at Western University in Seoul, South Korea
I'm very curious where their source of capital is what the return profile looks like. Based on the description, it sounds like they use company's CF to buyback shares, thereby increasing the ownership of employees? Given the time horizon and a few other factors, the potential returns don't seem too attractive imo..
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