I'm independently advising an extended family member on a deal. We're just getting ready to market it to some PE shops, and it has received interest from a few (2 to be exact) significant small/mid-cap PE funds mentioned on this forum from time to time.
Its more of a venture capital type deal, but the nature of the business is very attractive to PE funds.
My question is for the experienced monkeys... what do you think is a fair fee? I'm inclined to take an equity portion as a fee, so really it is of no expense to either the sponsor or the original principals (except for dilution).
Through some indirect questions one of my MDs mentioned that advisory fees on something like this could be 100bps of capital raised (debt+equity). Which would be pretty good for me. Now there's 2 issues:
1- of the 2 reputable PE shops that have shown interest, I solicited one and the principal solicited the other. So obviously if the principal's PE contact ends up funding the whole thing, I won't be AS responsible (but obviously it is my models, presentation, and expertise that got this into marketable shape)
2- regardless of the sponsor we use, I'm not responsible for the debt raise, the sponsor will be arranging that themselves obviously
So is the 100bp of (debt+equity) fair?
What is the proper fee? What should it be a percentage of? How will that vary, if at all depending on the the sponsor providing the equity investment.
Ideally, now is where I can really add value(earn my fee) by bringing in as much PE interest as possible and negotiating for the best terms (better than the principal's PE contact) making my funding source the top choice.
And insight would be much appreciated. Its a relatively decent sized deal, and I know I'm gonna be up against some BSDs, so I don't want to show any sign of naivety... but obviously, I feel like I made a significant contribution to this and I'd like to be fairly compensated for the first deal I close so I want something reasonable structured into the deal.
PMed you
So, I have been involved in some very similar situations and here is how my partners and I were able to be paid.
First off you would charge a fee for all of the equity you are directly responsible for. This will be (assuming you want to roll into the deal) 2-3% with a smaller cash portion (call it 100bps).
The second thing you would get paid on would be an acquisition fee (or M&A advisory fee). This should be based on total deal size and would be based on a sliding scale, smaller fee for bigger deal. Assuming you are doing modeling etc, but not legal advise or arranging for deal execution the fee will be smaller. If you were doing everything (ie being a one man investment bank running the process) you could fee comfortable charging as much as 100bps. The less you do the less you can charge. To figure out how much you can charge look at the total fee load of the deal, it shouldn't exceed 5% and think about the amount of work you are doing out of the pile.
PM me if you want more detailed info about how my partners and I have done this.
Just curious, how old are you guys?
This is a total side note...
...but what is your picture from? It's so unbelievably absurd looking, but the chick looks hot, hahaha.
Anyway, sounds like you've got a sweet gig going.
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