How to structure a restaurant chain buyout?

I have a contact that's been in the business for over 25 years, he's one of the founders of his niche of QSR in the country. He currently only has 10 locations now - previously much more.

He wants to get back into the growth business and have identified a few buyout targets (QSR chains) - all of which are profitable.

For this transaction, should he set up a holding company, raise equity and debt financing for acquisition of the chains? If so, how much ownership should he be expected to give up? Total transaction size would about US$5, with additional $3M of working capital. He doesn't intend to invest any securable assets into the hold co., or provide any personal guarantees - only his time commitment to grow the business.

I've also heard of search funds being an option - how would the cap table be divided between the operators and investors?

Is there a better way to structure this venture?

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Feb 8, 2019