searcher equity/comp for multiple acquisitions

searcher profile

June 07, 2022

by a searcher from Northwestern University - Kellogg School of Management in Fort Lauderdale, FL, USA

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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commentor profile
Reply by an investor
from Northwestern University in Tampa, FL, USA
Do you mean different spaces, or a rollup in one industry?

For a rollup, you hope to address all searcher economics at the topco/holdco so economics for the project as a whole remain consistent. If you are making entirely distinct acquisitions (one business services company and one CPG company for example) then you will have separate holding companies for each one and the need to manage economics at both. Economics are likely to be slightly different from one to the next as deal dynamics and capital sources will likely be different.
commentor profile
Reply by a searcher
from Columbia University in Jacksonville, FL, USA
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.
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