searcher equity/comp for multiple acquisitions

by a searcher from Northwestern University - Kellogg School of Management

1 year ago

It is expected that a search fund will have multiple acquisitions over the next 5 years. Not clear at acquisition #1 whether the following acquisitions will be held as separate entities or absorbed by the first entity.. Curious how others have structured equity compensation for a searcher especially if all entities are not separated. Timing and %. Seems like it could get complicated quickly...

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searcher from Columbia University - Columbia Business School

Honestly, I have a holding company and it sucks. It is good for diversifying risk at large levels but for < $10M in EBITDA, not sure it is worth it. I know franchise operators who have a hold co for several different brands, but I wouldn't worry about it until you get large. Also, the larger it becomes the more integrated you want it and the more attractive it will be with 1 set of everything. Just my $.02 and I am not a huge player by any means.

1 year ago | like reply | 1 like

searcher from Northwestern University - Kellogg School of Management

Thanks John. Likely same space (HVAC). For example, acquisition #1 this year. Operator has time-based and performance based equity pool.. Next year the Holdco acquires HVAC #2. Same operator managing both. If the businesses are separate entities its cleaner, but if combined then I'm having trouble thinking about how that might work. If you have access to any examples that may help.

1 year ago | like reply | 0 likes

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