Self funded search: alternative deal structures
September 18, 2018
by a searcher in Ghent, Belgium
In my view, performing a self funded search enables the possibility to come up with alternative deal structures. I'm giving two examples here below. Would love to get remarks on them from the community or hear other alternatives that have been used in practice.
1. There could be an option to close the transaction after a 'defined collaboration period' of six months for instance. During this period, the buyer can get hands on experience to get to know the company much better and the lower 'acquisition risk' might be 'compensated' in the final SPA terms.
2. Some sellers may want to retire from day to day management and remain active as a shareholder and hold a board position. Although this situation can have negative side effects (clear segregation of duties is required), I can see some very positive effects such as the 'mutual interest' of the seller and buyer for the continuation and growth of the company.
Regards,
Gijs
from University of New Hampshire in 101 Rocky Pond Rd, Hollis, NH 03049, USA
His involvement is critical however we will need to clearly communicate to everyone who has the authority and responsibility post-close. I see challenges with your option 1 - if the seller in your example has decision making authority but its counter to what you need to have done that could create challenges. In my deal the current owner has a different financial perspective since he has no debt on the business after the deal closes the dynamic is different so we have to implement different spending and production management controls.
Hope
from Brown University in Boston, MA, USA