Entrepreneurs, Searchers and Independent Sponsors use our services to find investors for their next acquisition. We make your deal available to our network of investors looking for ETA investment opportunities. Our site allows you to reach a large number of accredited investors with one submission, resulting in significant time savings compared to the traditional model of researching and contacting investors manually. We run this site as a free community service to support deals in the ETA ecosystem.
Please use the Submit a Deal form to tell us about a deal you have under LOI or a deal that is very close to LOI. If you are not yet at the LOI stage, please join our Network to get occasional updates and introductions to investors.
Our investor network is interested in deals falling into the "ETA" or "Entrepreneurship through Acquisition" category. These are profitable small businesses with $100k - $5.0M of EBITDA. We do not support the following types of situations: unprofitable companies, startups, projects, and rollup ideas with no initial acquisition under LOI.
Our service is available to the following types of principals:
Entrepreneurs and Executives
Experienced professional raising equity funding to acquire a company that they will run as CEO. These deals are often financed with SBA 7(a) debt that require a 10-30% equity injection. The Entrepreneur will typically sign a personal guarantee on the SBA loan and raise a small amount of equity from external investors. Entrepreneurs use our platform to raise equity for their deal.
Self-funded Search Funds
Early career professionals looking to become CEO by acquired a small business. Self-funded searchers will typically identify investors and raise capital after signing an LOI.
Traditional Search Funds
Similar to self-funded search funds, traditional searchers are early career professionals looking to become CEO by acquired a small business. Traditional searchers often look for larger and more scalable companies. Traditional search funds identify investors upfront, but may have equity gaps after they find a deal. In addition, traditional searchers raise search capital before starting their search. Both types of capital raises are supported by our site.
M&A professionals with an attractive deal under LOI. These professionals typically partner with experienced management to run the target company. Independent Sponsors often behave like private equity firms but raise capital on a deal-by-deal basis.
Economics and Structure
Investors in our network typically expect a return in the 20-30% IRR range with conservative model assumptions (low growth, entry multiple equals exit multiple, etc.).
Deals are often structured using a participating preferred equity instrument with a preferred interest and a participation in common stock. While terms are highly deal specific, the following ranges are typical:
- Preferred interest: 8% - 10%
- Investor common participation: 20% - 80%
The investor common participation depends on deal attractiveness (multiple paid, historical growth, quality of business) but is also highly dependent on the amount of equity raised. For small equity raises, we often see investor participation in the 20-50% range while larger equity raises will often get done at 50-80%.
An entrepreneur is acquiring a $1.0M EBITDA business for $5.0M, takes out a $4.0M SBA loan, and raises $1.0M in equity from investors. The investor terms are 10% preferred return plus 50% participation in common. After 5 years the business is sold for $7.0M and has $2.0M in remaining debt.
In this example, the proceeds would be distributed as follows:
First, the $2.0M bank debt is repaid
Second, investors receive their $1.0M investment back
Third, investors received a 10% preferred interest on their capital contribution. After 5 years, the accrued amount would be $0.6M.
Forth, investors receive their participation from the amount allocated to common stock. In our example, $3.6M is allocated to common stock (= $7.0M sales proceeds, minus $2.0M remaining SBA debt, minus $1.0M investor capital contribution, minus $0.6M in preferred interest). Of the $3.6M allocated to common, Investors would receive a 50% participation, so $1.8M.
Fifth, the entrepreneur receives his or her participation in common stock. This is $1.8M (50% of $3.6M) in the above example.
The Entrepreneur would received $1.8M (plus a market salary for 5 years) in the above example. The return to investors is $3.4M (= $1M return of capital + $0.6M in preferred interest + $1.8M common participation) or 3.4x MOIC / 27.7% IRR.
Join our Network
Please complete the Submit a Deal form if you have a deal under LOI and are actively looking for Investors to fund an acquisition.
If you are not yet close to signing an LOI, please use the form below to join our network and get occasional introductions to Investors.