Background. During a closing Carrollton learned that the seller, an experienced mineral buyer, had more opportunities than available capital. While completing our due diligence, we learned that he had been in business for 25 years and had a reputation for dealing fairly with mineral owners.
Challenge. The mineral buyer was able to source opportunities through his long standing experience and relationships but often he wound up with more concentration in an area than he desired. His challenge was to find a partner to help close on existing and future opportunities.
Solution. The parties entered into a joint venture whereby they agreed to an area of mutual interest, the division of responsibilities, the acquisition criteria and the closing procedure. Each party had the right to acquire 50% of each transaction.
Carrollton paid a greater share of the costs at closing but at a price lower than it could have if working alone. The partner was compensated for his efforts and achieved asset diversity by spreading his capital over a larger asset base without taking more risk. By both parties using their combined strengths and expertise, they were able to strengthen their reputations and acquired minerals in good areas at fair prices.