Are the "second investors" limited to the search phase investors?

by a searcher from INSEAD

4 years ago

What I mean as "second investors" are the additional investors that will finance the acquisition per se

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admin from Massachusetts Institute of Technology - MIT Sloan School of Management

In a traditional fund structure, the contracts are set up so that search phase investors have the right of first refusal. Generally what happens is that the deal goes around the table twice,

round 1:
all search phase investors can put up to their pro-rata share

round 2:
any search phase investors can take the pro-rata share of the investors who passed in round 1

If any unfunded equity remains on the table after round 2, then the searcher can try to raise outside capital.

4 years ago | like reply | 2 likes

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