Looking for recommendation for deal structure for an IT company

Member resources:

Frequent asked questions:

What is Searchfunder.com?

Searchfunder.com is an online community of searchers, investors, lenders, brokers and other professionals. Over 80% of those involved in searchfunds maintain a Searchfunder account to help them network, hire, and mentor others.

What are the benefits of membership?

In addition to accessing the most active online network of business buyers, Searchfunder licenses research that is simply not cost effective for individuals. Access over 15,000 industry reports and 50,000 transaction financials. You also get monthly credits for contact information for your company sourcing campaign with the option to purchase more at drastically discounted rates. Searchfunder has pre-purchased access from these data providers in order to empower individual buyers and to help searchers level the playing field versus private equity.

Do you have deals?

While we are primarily a buy-side network, we do have hundreds of brokers that regularly post deals to the community.

Can I find an internship on Searchfunder?

Absolutely! We have the industry's largest intern job board. If you are considering a search, the first step is to help another business buyer so you can hit the ground running.

What does it cost?

Searchfunder is a subscription service. We offer flexible monthly, annual and lifetime memberships.

Monthly

$79 / month

Annual

$19 / month

Lifetime

$432 / once

Those who maintain an account with us for over 4 continuous years are permanently added to the community without the need for a membership.

Do I need an MBA to join?

While a large number of our members come from dedicated programs at Harvard Business School, Stanford GSB, Chicago Booth, and other top programs, searching is no longer reserved for the elite. With the current abundance of dry powder in private equity, and an increasing number of business owners reaching retirement age, good deals rarely go unfunded.

Post a question, deal, job, etc...

Make a post...

Complete registration to post.

by a searcher from Rutgers-The State University of New Jersey-Newark/New Brunswick - Rutgers Business School
in St Paul, MN, USA

2yrs ago

Looking for recommendation for deal structure for an IT company

I am considering acquiring a stake in an IT company specializing in Managed Services and Cybersecurity, a company I am well-acquainted with. The current CEO and CIO are also interested in purchasing the company. The owner has proposed that I join as one of five owners. I'm inclined to accept this offer, especially since I have a positive view of the two operators who would become my co-owners.

However, I've never been in a position of holding a minority stake in a company before. Therefore, I'm seeking guidance on several key aspects of structuring such a deal. These include determining the equity stake and investment terms, navigating the board composition, especially in scenarios where I might not secure a board seat, managing operational control and establishing a clear chain of command, ensuring operational transparency, and formulating exit strategies.

I would greatly appreciate any advice on how to approach these elements to safeguard my investment and contribute effectively to the company's success.

0 Likes

157 Views

reply by a professional 2yrs ago
from University of Miami in New York, NY, USA

Conrad - as you explore this opportunity, most critical for you is what a proposed Shareholder Agreement and the Bylaws actually say. If you have the leverage to push language in those docs that protect you, and you may because you said there are 5 prospective owners and equal percentages, then that’s where your concerns are met.

if your money is equally as important as the others and is critical to buying the company, then you can push for control. Suggest a class of shares where you are guaranteed a board seat, out of a potential 5 directors (each shareholder gets to pick one).

that said, the above is written in an information vacuum. I’d live to have a deeper dive with you and ascertain if there’s an opportunity to assist. Feel free to reach out to me at redacted orredacted.

reply by a searcher 2yrs ago
in New York, NY, USA

Ultimately, this will require you to make decisions about your personal risk tolerance and what your vision and impetus for becoming involved is. Owning a minority stake as a non-operator is a lot different than being an operator. How important is control to you? Giving that up will require being paid for losing that control premium in the economics. You should also hire an attorney who is able to represent your interests in negotiating the governance of the company, because that will be key. You mention not having a board seat -- does that mean not having a vote but you can be a spectator? Will you have access to board materials to review?

Just as importantly, you should think about the financial implications. Who will set dividends and how will they be allocated? What rights of refusal are there for existing investors when a shareholder wants to sell? If not everything goes well financially for the company, what rights do you have if the majority holders want to sell the company at a valuation lower than you agree with?

There are minority shareholders everywhere -- in search, in the stock market, in private equity. But each has a different reason for being in the position, and that is why I think the most important thing you can do is to introspect a bit and figure out what's important to you emotionally, financially, and professionally. Your professional advisors will be much better equipped to be your advocates if they have those answers.