I have a question I am hoping someone can help me with. If a searcher raises additional capital for a tuck-in acquisition, does the searcher's 25% equity gets diluted along with all of the other investors?
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1) HoldCo making multiple acquisitions, each into a new entity like Acq1, Acq2, etc.
2) Acq1 acquiring multiple businesses and folding them into Acq1.
3) Typically, all investors in Acq1 are treated equally, pari-pasu on all subsequent acquisitions. However, investor agreements may give certain class different rights.
4) Capital: Is new capital for Acq2 going to benefit from Acq1 if it is doing well? Or are they going to share the risk of Acq1 is under-performing? How does one value Acq1 if 1 or 2 years has passes after its acquisition? How would lenders of Acq1 treat new Acq2? If Acq2 needs debt, in addition to equity, how will investors and lenders of Acq1 react?
5) How would one incentivize management of Acq2 w/o creating conflict/collusion with that of Acq1?
In general, imo, there are material differences between "add-on acquisitions" and "roll-up acquisitions".