Investing + operator-support instead of acquisition?

January 19, 2026

by a searcher from Georgia Institute of Technology in San Francisco, CA, USA

Curious if anyone here has chosen to make a minority investment and support the business operationally instead of buying outright. If you’ve done this, I’d love to hear what it looked like in practice: how you structured it, what governance/rights you negotiated, and any key lessons or gotchas.

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Reply by a professional
from American University in Irvine, CA, USA

Thanks for the tag, ^redacted‌. Chris, we have gone through this with clients in two contexts. One is when a Buyer wants to make an acquisition, but the Seller for some reason does not want to make the deal at that moment, but does at some future point, and the parties will negotiate a management relationship with a right of first refusal because the buyer wants to get to know the business better prior to acquisition, and the Seller feels the Buyer will add value for the period prior to his sale. The second circumstance occurred when parties to a potential joint venture wanted to "test the waters" before committing to a long-term marriage. In both kinds of situations, the successful ones had a few things in common: the parties spent a good deal of time (1) making sure they were aligned on where the business was, where they wanted it to go, and how they planned to get there (what the contribution of each party would be); and (2) making sure that they had a strong Operating Agreement that clearly spelled out roles and responsibilities of each, the profit-sharing arrangement between them, and a strict organizational structure and decision-making process, especially if a dispute arose. The unsuccessful transactions did not clarify for themselves how they would deal with future situations, either disputes or just a simple exit strategy. If you would like to speak further about this, feel free to DM me.

Reply by a searcher
from University of Pennsylvania in Bellevue, WA, USA

One critical point is that you lose the benefit of leverage if doing a minority equity investment. If the value of the company is $5m, for example, you can buy 100% of the company for $500k in equity and the rest in debt (assuming DSCR supports it). However, if you go the minority equity investment path and buy 10% of the equity, that would require the same $500k in capital.

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