How much equity do traditional searchers end up with?
April 29, 2024
by a searcher in Tulsa, OK, USA
How much equity (typical range) does the searcher end up within a deal?
Where you raise a Searchfund to pay yourself while you search and then have "committed" capital.
Is there any data out there on this?
I realize there can be a lot of variables, just trying to gauge the market.
I'm guessing ~20%
from Oklahoma State University in Wichita, KS, USA
Create value for Shareholders.
Doing so through the operating platform by creating value for customers. The sole reason that businesses exist.
How the pie is sliced is important but maximizing the risk adjusted return is more so. I see some folks get hung up on percentages but from my small vantage, the sophisticated investors and searchers/operators, remain focused on creating mutual value and delivering results. As such, incentives are aligned and possibly that translates into a larger equity stake for searchers. One way to do this is liquidation preference before the searcher is in the money.
I run a hybrid search (self + sophisticated investors). With major skin in the game at the search stage to preserve investors capital, consider the risk and reward of various opportunities and ultimately produce high returns.
from Washington and Lee University in Baltimore, MD, USA
Here is a great debate on traditional vs self-funded and the economics: https://acquiringminds.co/articles/self-funded-search-vs-traditional-search-funds#why-traditional-search-fund-terms-are-fixed