Two-searcher search funds - pros and cons?

August 21, 2024

by a searcher from London School of Economics and Political Science, University of London in Stockholm, Sverige

Hi, I am curious if there are any searchers with experience from running a search fund with a partner? What are the pros and cons with that and how did you split the upside? Also, how did you see the fact that when you acquire a small company and two new people it may have a big (negative) short term impact on the P/L - was that an issue?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

One interesting point I will make about partnerships if you plan to use SBA financing. If one of the partners stays under a 20% ownership interest, the SBA debt will only apply to the owner that owns 20% or more of the business and guarantees the loan. So you will keep the $5 million is available SBA funding for the second owner. So when you go to do the next deal, you can flip the ownership on that deal and have another $5 million is SBA availability. Just one side benefit of partners if you structure it the right way from an ownership perspective. If you have questions on SBA financing or any other financing options, you can reach me here or directly at redacted

Reply by a searcher
from University of Michigan in Bay City, MI, USA

There are a lot of ways that a business partnership can go sideways. Over time, life circumstances often change, and both abilities / willingnesses to contribute to the business and perceptions of fairness change right along with them. It is absolutely imperative to have a robust operating agreement that addresses as many scenarios as possible, including forced sales of equity from one partner to another.

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