Investor/Funds that are long hold (aka gimme the dividends)

by a searcher from University of New Hampshire

6 years ago

HI - looking for some insight / ideas / investors  who aren't on a 5-7 yr exit plan?  A couple of the owners I am talking with are interested in exiting after they  (or there family before them) have built a sustainable company that been around###-###-#### years. They don't want to sell it to someone who will just run/grow it and then turn around and sell it in 5-7 years.  They even might want to keep a minority ownership in it.  How many funds / family offices out there are long hold and will be happy to get an annual earnings distribution?

11 likes
192 views
3 comments

searcher from Harvard University - Harvard Business School

Timothy - I think there's another model where a re-cap between years 3-7 could give your investors cash flow dynamics similar to traditional search funds/PE while giving the seller assurance that you aren't just flipping their baby. Keep in mind that we're unfunded and will retain a controlling position in the company post-acquisition, and we've been very transparent with potential investors about our plans for a re-cap. Some investors have requested puts or other terms to ensure they get an appropriate IRR and cash multiple, but conceptually agree that a re-cap can meet their requirements as well as a sale.

6 years ago | like reply | 0 likes

investor from Harvard University - Harvard Business School

I think most search fund investors are open to longer hold periods. I would explain that search funds tend to hold businesses longer than PE funds (you can even point to the data), but I also wouldn’t make any promises, since you want to have flexibility.

6 years ago | like reply | 0 likes

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