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What is a founding partner?

Founding partner

The owner or owners of the initial company acquired by private equity buyers seeking to merge a number of firms in the same line of business into a larger entity. As they were in at the start of this consolidation, they are called founding partners.

Where have you heard about founding partners?

Media coverage of private-equity consolidations - known as 'company roll-ups' - may refer to founding partners. Should shares in the merged company ever be sold to the public, the sales documentation is likely to refer to founding partners.

What you need to know about founding partners.

A company roll-up will often begin with the acquisition by private-equity investors of a relatively substantial business, after which smaller firms in the same line will be bought and folded into the larger business. The owner or owners of the initial business, if they retain equity in the enlarged company, will be known as founding partners.

As they were there at the start, their equity is likely to be more valuable than that issued to fund later acquisitions. This is because it will have been issued at lower valuations, thus in more generous amounts, there having been no trading record of the enlarged firm at that time.

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