Search Fund & Independent Sponsor Model | Multi-Acquisition Holdco with LP/GP Waterfall

Description
You can underwrite one acquisition on a single sheet. Do it five times and you still have not modelled a fund - because three things exist only above the deal level, and they are exactly where the investor's money goes.

The search. Capital is spent for years before anything is bought, and some of it buys nothing at all. It then converts into equity at a step-up, typically 150% of what was originally invested, which is capital and preferred return standing in front of the promote. Switch the step-up off in the model and watch the sponsor's carry rise: that difference is what it is worth.

The waterfall. Return of capital, preferred return, catch-up, promote. Both conventions are computed on the same cash, every time the file recalculates: whole-of-fund (European) and deal-by-deal (American), with a clawback switch.
The order of events. Capital called late earns more on the same dollars. A promote paid early on a winner, before a loser is recognised, may never come back.
Two propositions you can test rather than take on trust. Deal-by-deal without a clawback, with one losing deal in the portfolio, pays the sponsor more than the whole-fund entitlement - and the excess is precisely what the investors lose. Deal-by-deal with a full clawback converges to the whole-fund result in total dollars, leaving a difference that survives only in timing.

The output is a bridge, in dollars, that adds up exactly: cash generated by the businesses, less the equity invested in them, less the search phase, less management fees, less transaction fees, less the promote - leaving the investor's net profit. In the default portfolio the businesses earn 22.9% at the deal level and the investor is paid 14.9% net; the bridge tells you which of the five costs produced the 8.0 points of spread, and the identity check on the sheet reads zero. Beside it is a return ladder, presented without pretending the rungs add up, because an internal rate of return is not a sum of parts.

At the deal level: five targets, each with entry multiple, senior debt, growth, capex, cash taxes, exit and coverage ratio; a seller note with a standby period where interest accrues instead of being paid; and the published SBA 7(a) caps checked against your inputs - $5m maximum loan, 75% guaranty, ten-year maximum maturity outside real estate.

The search fund structure is modelled rather than approximated: the two-stage capital raise, the step-up on conversion, and the searcher's equity in three tranches - one at closing, one vesting over four years of employment, one on performance hurdles that begin at a 20% net return to investors and top out around 35%.

A default case that is deliberately uneven. Four acquisitions and one target that is worked and never closed. One of the four returns 0.51x of the equity it absorbed, with a minimum debt service coverage ratio of 0.91x. That is not pessimism: the published record says roughly one search fund in three never acquires, and roughly one acquisition in four has lost money for investors. Exit multiples are at or below entry multiples on every deal.

Validated against a published worked example. The waterfall engine reproduces the example printed in the Stanford GSB 2026 Primer on Search Funds to within the rounding of the printed text - the comparison is on its own sheet, so you can check it rather than trust it.

Twelve sheets, 2,996 formulas. Excel and Google Sheets, no macros, no external links, no iterative calculation. Includes a 7-page user guide. Every benchmark carries its source and a reliability tag; where no benchmark exists - entry multiples, exit multiples, sponsor fee levels - the sheet says so instead of inventing one.
Educational planning tool. Not financial, investment, tax or legal advice.