Teamshares vs Search Funds

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by a searcher from INSEAD
in Singapore

1yr ago

Teamshares vs Search Funds

Hi All - I recently came across TeamShares (redacted), which offers an interesting variation on the SF model.

I wondered if anyone here could comment on precisely how they structure their transactions?

At a 60,000ft level, they talk about transitioning 80% of ownership to employees over 20 years.

They mention acquiring companies slightly below market value, whilst I'm assuming their economics are driven by "lending" the business money (a first-lien) at a floor interest rate, which the firm "repays" to support this transition. I imagine there must be some form of revenue royalty arrangement in there as well, for all the system / centralised benefits they offer. Can someone confirm this?

Also, how do the employees monetise the "shares" they receive in the business, as they suggest no onward interest to sell the business?

If anyone can provide insight, that would be great - and if someone would prefer to share that privately, then do feel free to reach out on redacted Cheers!

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reply by a searcher 1yr ago
from INSEAD in Singapore

Hi Matt - appreciate the comments, but not entirely sure they're on the mark. This is what Teamshare's website states:

"Teamshares buys small businesses from retiring owners, grants 10% ownership of the business’s stock to employees after closing, and progressively increases employee ownership to 80% within 20 years. Employees earn stock through ongoing service. They do not have to buy stock.".

I'd say it is a variation, but that's my interpretation (and I respect yours) - I look at it as Teamshares doing the "Search", and parachuting a Searcher-equivalent directly into a company, where their economics may look similar through this transfer of shares. You'd be right to say there are differences, but there are also similarities too. Either way, doesn't make a difference what we call it - still an interesting model nonetheless!

I do agree with your point on providing banking, insurance, and other services - maybe there's a % charge on transaction flow that forms part of their economics.

reply by an investor 1yr ago
from Ivey Business School at Western University in Seoul, South Korea

I'm very curious where their source of capital is what the return profile looks like. Based on the description, it sounds like they use company's CF to buyback shares, thereby increasing the ownership of employees? Given the time horizon and a few other factors, the potential returns don't seem too attractive imo..