Valuations for Investor Exits - Self-Funded Search

March 24, 2023

by a searcher from California State Polytechnic University - Pomona in Pomona, CA, USA

If a sponsor wants to keep a company long term but investors want an exit option, how have you structured valuations for investor exits in your agreements? I guess this could apply to any partner exit from the company.

Working through the investor agreement on a self-funded search and I would love to hear of options other than hiring someone to do a business valuation, or even how your agreement structured the valuation method/process.

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Reply by a professional
from Villanova University in West Chester, PA, USA

Hi ^redacted‌! There's a number of ways to structure this agreement. The valuation can be a calculation, a fixed number or a valuation at the time of the exit. In addition, there's a number of terms you can include in your investment agreement to address this. First, structure - you could have a different structure of the investment for the sponsor versus other investors i.e. debt instead of equity, profits interest, phantom equity, etc. In addition, you can have rights of first refusal, right of first offer, option to sell to the company or sponsor, etc. There's tons of ways to address this. I'd be happy to discuss this further.

Reply by a searcher
from Babson College in Fort Collins, CO, USA

I am looking at a large lithographic printing company and wondering if anyone has had any experience looking at these as a search fund target? I like the space, and understand the technology, I am just learning that there are some negative connotations around the printing industry, and wondering if anyone has expereince using printing as a Search Fund theses?

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