Business idea - viable or stupid?

Based on the most helpful WSO content, here are some insights regarding your business idea:

Viability of a Transaction-Focused M&A Service Business

1. Market Demand:

   • There is a potential market for specialized transaction services, especially for firms that may not have the in-house expertise or resources to handle the complexities of deal closing.
   • Smaller GPs and firms might find value in outsourcing these services to ensure smooth and efficient deal closures.

2. Competition:

   • While you would be competing with large full-service M&A firms, your niche focus on post-contract deal closing could differentiate your services.
   • Emphasizing your extensive experience in closing deals in both private equity and real estate could be a strong selling point.

3. Service Desirability:

   • Many firms might appreciate the ability to outsource the intricate and time-consuming aspects of deal closing, allowing them to focus on other strategic activities.
   • Your service could be particularly attractive to firms looking to streamline their operations and reduce the risk of deal failures.

Fee Structure

1. Fee Expectations:

   • Fees in the M&A space can vary widely based on the complexity and size of the deal. For example, in real estate finance, fees can range from 0.5% to 2% of the transaction value, depending on the services provided and the market conditions.
   • For high-value deals (e.g., $100MM+), fees might be around 0.70-0.75 bps, especially for complex transactions involving multiple layers of financing.

2. Potential Fee Models:

   • Flat Fee: Charging a fixed fee for your services could provide clarity and predictability for your clients.
   • Percentage-Based Fee: Charging a percentage of the transaction value might align your incentives with the success of the deal.
   • Hybrid Model: Combining a base fee with a success fee could balance your need for compensation with the client's desire for performance-based pricing.

Conclusion

Your business idea of offering transaction-focused M&A services appears viable, especially if you can clearly articulate the value and efficiency you bring to the deal closing process. The key will be to differentiate your services from those of full-service M&A firms and to establish a fee structure that reflects the value you provide while being acceptable to your target market.

If you need more detailed insights or examples, exploring specific threads on Wall Street Oasis related to M&A fees and deal closing processes could provide additional valuable information.

Sources: Origination Fees on +$100MM Loans, What's happening during live deals?, Debt Placement Fees, Case Interview - How to get a sense of a potential revenue of a new business service?, How various professionals see the world