Deal Structure Advice for Long Term HoldCo?
September 13, 2025
by a searcher from Harvard University - Harvard Business School in New York, NY, USA
Not sure SF is the right forum but maybe worth a shot. I spent most of my career in large cap PE so I’m mot as familiar with LMM terms.
I have two businesses under LOI in my home state (I’m geographic focus) and could use some advice. One $2.5mm EBITDA and second $2mm EBITDA but sellers want a local long-term operator (not PE). Have other similar deals in pipeline.
I’d like to connect with sponsors who’ve been able to get a deal done in a hybrid structure of the typical models or investors open to such - a structure that allows the sponsor to ultimately achieve majority or 100% ownership of the business tied to performance (IRR or MOIC hurdles) and achieved via dividend distribution or debt recap in a long term holdco structure. This is to be done with non recourse / non PG senior debt (not SBA 7a).
I envision this being akin to a hybrid self funded and independent sponsor model. The sponsor maybe starts out with a 10-20% ownership position, not PGing the debt, does not take a closing fee, but over time increases ownership stake at various MOIC hurdles to investors.
SF is rife with posts on “how” deals get done in the LMM and there are three camps but wondering if there’s more:
1. Self funded - do SBA deal with a PG, keep 80-90% of the common. Downside- buy smaller and face potential bankruptcy if deals go south.
2. Trad Search - raise capital upfront for 2-3 year search, avoid PG, work to get 25-30% common carry, but searcher competes with institutional buyers for 2mm+ EBITDA businesses and need 35% net to get full carry. Difficult position for first time sponsor.
3. Ind Sponsor - float your DD costs, buy $3mm+ EBITDA business, earn 20-25% carry above 8% pref.
If you’ve been able to get a deal done (either as a sponsor or investor) in a long-term holdco structure with sponsor vesting into majority or 100% ownership, I’d love to connect.
Please let me know in comments and I’ll reach out directly.
Posting anonymously for certain privacy reasons.
from St. Cloud State University in Sheridan, WY 82801, USA
– You don’t want to PG. – You don’t want to do SBA. – You don’t want to put in significant personal capital. – You don’t want to take a closing fee (fine), but somehow you still want to end up majority/100% owner of investor-funded companies.
That’s not innovation, it's just asking investors to take all the execution and financing risk while you vest your way into ownership over time. Why would any rational capital provider agree to be diluted out of their own asset just so you can call yourself the “local operator”?
Traditional models exist for a reason: self-funded = high risk, high reward. Search fund = lower risk, shared upside. Independent sponsor = earn carry for putting deals together. You’re trying to cherry-pick the best parts of each while stripping out the actual risk you’d normally have to bear.
Unless you’ve got a family office looking to make uneconomic bets to support a “local operator,” there’s no reason serious investors would sign up to bankroll you into eventual 100% ownership. If you want that outcome, put your own balance sheet on the line like everyone else. Otherwise, be honest about the fact this is just a risk transfer play dressed up as a “new structure."
from Harvard University in Lynbrook, NY 11563, USA