The Flywheel of Buying Businesses in a Single Region

You know, ours is, ours is 10, 10, 10. And a similar performance based economics in terms of, of vesting or you know, getting more equity.

We're, we're looking at some different incentive models that really take into account this longer term hold approach. You know, there's you know, the IRR MOIC DPI thinking a little bit differently about some of those. And so those are, those are their, their economics which I think we, we're offering a package that would be at least as attractive or more attractive than.

And just to be clear on the, the three tranche style of traditional search, what people heard you say the eight a third, eight and a third. In your case, 10, 10, 10. So that's 10% for closing.

10% that vests over four years. So as long as they stay in the business for four years they've got 20%. And then the final 10% is based on performance.

As you were just saying, your performance hurdles are likely to be different than traditional search fund hurdles which are based on irr, I believe and imply an exit, a liquidity event. And so in this long term hold model that you have and that you're trying to encourage that IRR hurdle or metric makes much less sense.

And so you're trying to figure out how to gauge performance after four years even though the, your entrepreneur is likely to continue to be in the business indefinitely, one hopes. Yes.

And so and we, we continue to try to, we're continuing to innovate and think about this. You know, that's a, it's a long conversation right about sure. About IRR and then the shift to MOIC and some of these incentive plans that include moic.

But it kicks in at a certain time period and then it's like well okay, well if we're longer term, I mean DPI really should be, it's cash back that really should be the, the, the, the notion and you know, you can, and what, you know IRR and you, what that means in terms of whether you're going to expand your multiple or not and how you Think, I mean there's just, there's just a zillion pieces that…

I think one thing that's critical though that we have preserved as part of our model is that they get 10% at close meaning and that they, that they, we, we are not a find the deal, find the operator shop. You know, we've really made a decision that we are find the operator, find the deal kind of shop and you get 10% as a result of that.

And it makes it much more entrepreneurial, it provides more ownership and you know, control and it feeling like it's their search. I mean my partner Derek always says it's their search. I mean they could find an opportunity at Sleeping Giant that we're not going to invest in.

And I mean we get roer on any of those opportunities, but they could go do, they could do something else. It's, it's their search. And so I think that again creates a different model than typical PE where you would, you know, find the deal, find the operator typically.