What is the typical ownership structure in a search fund after acquisition?

The ownership structure of a search fund-backed company is carefully designed to align incentives between the searcher and investors while rewarding the entrepreneur for value creation. At the time of acquisition, the searcher typically receives 25-30% of the company's equity, though this can vary based on negotiation and the specific deal structure. This equity is often granted in tranches or stages to incentivize performance. In the traditional American model, searchers can earn up to 25% through a vesting schedule tied to tenure and performance milestones. The French legal framework requires different structuring due to tax regulations—searchers must actually purchase shares rather than receive them as grants, though often at favorable conditions with partial gifting mechanisms or deferred payment arrangements. Investors collectively own the remaining 70-75% of equity, with individual stakes typically ranging from 3-10% depending on their capital contribution. The investment structure at acquisition usually involves both equity and debt financing, with a roughly 50/50 split being common for small and mid-cap targets. This represents a more conservative leverage approach than traditional LBOs. Importantly, all investors remain minority shareholders individually, ensuring no single investor can dominate decision-making while the searcher retains operational control. The searcher's ownership can increase through several mechanisms. Step-up provisions or carried interest arrangements may grant additional equity if the company achieves specific performance targets, such as revenue growth, EBITDA improvement, or successful add-on acquisitions. Some structures include earn-out provisions where the searcher earns additional shares based on value creation measured at exit. Management stock option plans may provide further upside. For example, if a company acquired for €10 million is sold for €30 million after five years, the searcher's 25% stake would yield €7.5 million (25% of €30 million), representing excellent returns for several years of operational management. The ownership structure thus creates strong alignment: investors benefit from capital appreciation and board oversight, while searchers gain both financial rewards and the opportunity to prove themselves as CEOs of substantial businesses.