Carried interest (carry)

Definition

The operator's share of profits, once investors are made whole.

Why It Matters

It is where a searcher's own upside lives. A common structure grants the searcher up to a third of the equity, vesting in tranches as investor returns cross agreed hurdles. The carry pays for clearing the bar, not merely for closing a deal, so the hurdle schedule deserves as much attention as the percentage.

In numbers: On $10M of profit above the preferred return, a 20% carry pays the sponsor $2M and leaves $8M for the investors.