Advice on Structuring Equity Gap

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by a searcher from Aston University
in Birmingham, UK

2yrs ago

Advice on Structuring Equity Gap

Hi everyone,

I'm a self-funded searcher with a great deal in hand. I'm looking for advice on how to structure the equity gap. Specifically, I'm interested in the best ways to use preferred vs. common equity, incentive structures, anti-dilution protections, and step-up mechanisms based on the current deal environment.

Any insights or examples from your experience would be really helpful.

If you'd like to share a detailed example by email please send to redacted in advance!

Best,

Michael

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reply by a professional 2yrs ago
from University of Notre Dame in New York, NY, USA

Happy to help here - but definitely would need more information on the specific deal and exactly what you are trying to accomplish - are you trying bridge a valuation gap as it relates to purchase price? or do you need help making the equity injection into a target business and need to offer a potential investor equity to get them to fund the injection (and need advice on how to structure that equity)? I think you mean the latter.

I do a lot of work with independent sponsors operating under JV-type structures with outside investors so happy to chat on structuring. You don't necessarily need a preferred vs common structure if it's a small group of investors - you can just make yourself the manager under an LLC Operating Agreement and no one gets voting rights (Manager just makes all the decisions). Way simpler than doing two classes of stock. Anti-dilution would be protected with a ROFO.

Again, I do ALOT of these so have seen many different structures. Shoot me a DM or email me at redacted