Roll-Ups
January 30, 2023
by an investor from York University in Toronto, ON, Canada
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?
from The University of Chicago in Chicago, IL, USA
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".
in Manville, Lincoln, RI 02838, USA
What is the legal structure of this acquisition going to be like? As an asset purchase vs. stock purchase and subsidiary structures vs full asset incorporation into parent company could make a difference. Are there any anti-dilution provisions already present for you and/or your shareholders?
Happy to chat in detail sometime!