What to Expect from LPs & Family Offices in Deal Funding?

March 24, 2025

by a searcher from Keller Graduate School of Management of DeVry University in Dallas, TX, USA

Hello Searchfunder Community,

I'm currently a searcher focused on acquiring a micro-SaaS business and leveraging my 14 years of experience in online marketing and product development. My business partner and I have capital ready to deploy, but we've encountered situations where sellers are hesitant about SBA loans, and conventional loans often come with challenging interest rates and hurdles.

We're exploring the possibility of collaborating with LPs and family offices to fund acquisitions. Since I've never partnered with these types of investors before, I'm reaching out to tap into your collective wisdom:

Searchers: Have you partnered with LPs or family offices for deal acquisitions? I'd greatly appreciate hearing about your experiences, lessons learned, and any advice you could share. Open to a quick chat as well!

LPs and Family Offices: Could you share your expectations when investing in acquisition opportunities? Insights into typical terms, due diligence preferences, and partnership dynamics would be particularly helpful.

Thanks in advance for your insights!

Reply by an investor
from University of Colorado at Boulder in Durango, CO, USA

LP perspective: Our main differentiator is that we are more interested in long term value creation vs short term exit. We notice that everyone seeking capital is impressive, but it's important to still be able to answer "Why me?" other than an impressive resume. We look for 10+ year old companies with high margins and stable growth in recession proof industries. Our returns are cash flow distribution based versus exit proceeds, so we align around a long term plan to stabilize and grow the business through employee ownership. In terms of diligence, we ask folks some basic information off the bat, and then dive into diligence if there is alignment, which is a combination of working with the searcher on company diligence and diligencing the searcher themselves as well (basically, answering "Why you?"). Hope that helps!

Reply by an investor
from University of Southampton in Los Angeles, CA, USA

Depends on the size of the deal and whether you're looking at debt, equity or a combination of both? However, if you're concerned about challenging interest rates and hurdles then seeking institutional capital is not going to alleviate that. 10 year amort and prime + 2-3% that the SBA offers is hard to beat. You can find FOs that will extend interest only or more favorable amortization schedules on debt financing but you need to have a sizable deal and you open yourself up to refi risk as they're typically only on a 5 year term.

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