Search Fund Jargon Translator
Clear, plain-English definitions of ETA and dealmaking terms, with practical notes and examples.
Distribution Waterfall
A method for distributing investment returns among partners in a fund, where cash flows are allocated to different tiers of stakeholders in a specific order of priority.
Promote
The share of profits that the general partners or fund managers (the searcher) receive as compensation, regardless of whether they contributed any initial capital. It is a performance-based fee.
Self-Funded Search
A model of ETA where the searcher uses their own funds (or funds from a small, informal group) for the search phase and raises acquisition capital on a deal-by-deal basis.
Accelerator-Led Search
A hybrid ETA model where a searcher joins a formal program (an accelerator) that provides capital, mentorship, and resources for the search and acquisition process.
Sources and Uses
A table that summarizes where the money for an acquisition is coming from (Sources) and how it is being spent (Uses). The total sources must equal the total uses.
Capital Stack
The arrangement of all the different types of capital used to finance a company or acquisition, ordered by seniority.
Senior Debt
The most secure form of debt, which has priority for repayment in the event of bankruptcy. It is typically provided by banks and has the lowest interest rate.
Subordinated Debt
Debt that ranks below senior debt in the event of a liquidation. It carries a higher interest rate to compensate for the increased risk.
Covenant
A condition or restriction included in a loan agreement that the borrower must comply with. Failure to do so can result in a default.
Leverage Ratio
A ratio that measures a company's total debt relative to its EBITDA. It is a key indicator of a company's ability to pay off its debt.