From Searcher to Sponsor: How to Buy a $22m Business

Let's double-click on that, Jan. This is central. And just I'll pull in one sort of some flavor here. You mentioned the 30%, it's actually carry, not equity.

I'm going to ask you to differentiate those two, but effectively your percentage of the proceeds of this adventure is what both of those words mean. It's 30%. It almost feels like a traditional search fund, at least in terms of economics.

And one of the big pros of traditional search funds is that there is no PG, which I heard you just say. So in some sense, this feels similar to one deciding between... or getting used to doing a traditional search fund instead of a self-funded search. Do you think that's a fair comparison?

I think so. Yeah. And then just to clarify, so the 30%, so the carried interest in this deal was 20%. So it was 20% carried interest, but it was 30% ownership that I ultimately had just based on the equity check that I put in. So that's... That's where the 30% came.

But no, you're exactly right. It's very similar to search fund kind of economics. And you would still have investors and a board and all that.

So yeah, I would agree. It's a fair comparison.

Great. And then so just say more about carry versus equity that you just glanced off, but explain to people who don't know the difference in those terms and how you can have a different carry in equity. Yeah.

yes so the the equity uh would be just based on the the dollars that you put in so for simple math let's say you know you're putting in 10 million dollars everyone's putting in 10 million dollars into the deal and as you know the uh you know the sponsor you're putting in a million dollars you would get you know 10 equity all the equities just based on the total amount of dollars that are being…

the the carry is kind of the extra payment for the sponsor for uh reaching certain deal hurdles and in this case it was um everything after a 10 preferred return so after investors got all their funds back and a you know a 10 return on their invested capital anything above and beyond that would then get split with you know in my case

20% of it going to me as the sponsor and then 80% of the, the additional returns going to all the other investors. And so that's, that's what that carried interest would be. And so it's the other kind of added carrot in an independent sponsor deal.

Um, the only other one that I didn't mention was the, um, uh, the deal fee that was a part of this as well. So for finding the deal and getting it to close, another part of my sponsor economics are having a deal fee that I rolled in fully as equity into the deal.