Common Equity split between Investor/Sponsor(Operator) in SearchFund

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April 11, 2021

by an investor from Villanova University in New Jersey, USA

All,
We are looking to invest in an acquisition deal from a search funder who is going to operate. Would like to know what's the typical industry standard for common equity split between Investor(s) and Sponsor(Operator) in searchfund. Is 45/55 (Investor/Sponsor) unduly favoring the sponsor? Sponsor gets Operator salary also during the lifecycle.

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Reply by an investor
from University of California, Berkeley in San Francisco Bay Area, CA, USA
It depends on the company metrics (growth, EBITDA size, etc), the equity check size and the acquisition multiple. 45/55 could be a good deal or completely off market depending on the specific circumstances.
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Reply by an investor
from Villanova University in New Jersey, USA
Sponsor has a PG on the Deal.
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