Best practices for pricing investment units in PPM
August 03, 2022
by a searcher from Abilene Christian University in Dallas, TX, USA
What are best practices or thoughtful considerations to take into account when determining the i) the number of units offered and ii) price per unit and then iii) economics of how that proposed structure will eventually roll over into the acquisition capital?
Currently working on my PPM right now and we are doing a partnered search, so for simplicity of this example let's say we want to raise $600k of search capital. What are the differences between offering 10 units at $60K/unit vs 15 units at $40K/unit vs 20 units at $30K/unit? I understand the step-up basis and that there would be $900K that would rollover into the acquisition as equity, but what would the rest of the sources & uses look like on $5MM EV deal assuming lets just say 60% equity/40% debt for this example?
from Massachusetts Institute of Technology in Boston, MA, USA
Your budget is fixed (600K in your example) and investors reason on % of the cap table and $ allocation rather than units. Not unusual to see investors take 0.5 or 0.25 units
from Austin Community College in Hollywood Beach, Hollywood, FL 33019, USA