Hey everyone,
Looking for a quick market check on debt placement / financing advisory fees in the lower middle market.
I'm running a lower MM buy-side LBO and expect to raise about $15M of private credit. Getting bids from advisors and one boutique we’re talking to proposed the following:
- Retainer: $9.5K/month
- Success Fee: 4.5% of total debt raised, with a $500K minimum
Scope is for full process, prep CIM, contact lenders, run the auction, coordinate diligence, negotiate term sheets, etc.
4.5% / $500K min sound in line, high, or low vs. market?
Any insight on typical minimums, tiered fee structures, or flat retainers for deals of this size would be super helpful.
Legal is going to run around $150K and thinking we will need QoE for the CIM so I'm trying to tget a sense for total fees.
Retainer seems in line but 4.5% or 500K is absurd. Typically have seen a 2-2.5% or ~$200K success fee. For reference am in T&R consulting in the LMM - MM space
What do you mean "running" the LBO? Your firm or you personally are the buyer?
You are going to pay fees out of the wazoo if you hire a debt advisor. Rough estimates that I would use:
-- $300k / 2.0% of OID on committed debt of $15M. You might be able to beat lenders up to 1.50%-1.75%, but base case should be 2.0%
-- $50k for QOE. Can probably find someone to do it for closer to $20-$30 but if you want a shop a tier below the Big 4 that has a recognized name (e.g. Moss Adams/Baker Tilly, Grant Thornton, those types) I would budget $50k
-- $150k for Legal. Note that any LENDER legal fees typically get passed through and paid by the borrower as well (not sure if your $150k accounts for that or whether that is just borrower legal)
-- $500k min. for debt advisory from your estimate.
You're at $1.0M here before other ancillary/unexpected stuff that always pops up (like M&A legal -- purchase agreement negotiation, diligence, etc., and any other 3rd party work that needs to get done). Not sure what the TEV is here, but lenders in this space won't go much above 50% LTV (e.g. lending 2.5x into a 5.0x deal or 3.0x into a 6.0x deal) so presumably we're talking about a ~$30M purchase price and you're likely going to pay like 5% of the TEV in expenses when it's all said and done, which is really high.
Have you tried sourcing debt yourselves and were unsuccessful?
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