ADVICE ON STRUCTURING AN EARN-IN / BUY-IN EQUITY PARTNERSHIP?

Another self-funded searcher and I have come across two independent opportunities in Canada to gain equity stakes through either an Earn-In, Buy-In, or a combination of the two.

Scenario 1:

  • A national distributor of Arts' and Crafts with 3 DC's across Canada; ~$30 million in Sales with ~8% EBITDA margin
    - The sudden passing of the founder has left a gap in the company leadership with the son of the founder taking over as sole equity owner and as the new CEO
    - Self-Funded Searcher A has been hired as an interim General Manager on a 9 month consulting contract to help stabilize the organization
    -The contract has gone very well and both parties have spoken about the potential for an equity partnership
    - Neither of the parties has structured anything like this before

    How to deal with the substantial Arts & Crafts Covid bump for valuation is a completely different topic

Scenario 2:

  • A technology services company in Canada: ~$7,000,00 in sales with a ~15% EBITDA margin

    - Currently has two equity partners with a skills gap in the organization inhibiting growth
    - Self-Funded Searcher B has the exact skill set to fill this gap
    - Discussions have already begun regarding a partnership such that Searcher B would come in to help run the company
    These scenarios feel similar and we’re looking for someone that might have relevant experience in setting up such an equity partnership. Does anyone have any advice on how to approach this structure?


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