Capacity for Acquisitions and AM
I am doing deals on the side of my FTE in order to eventually break out of my position and run my own business. I have partners reaching out to me asking for me to help run their deals and have agreed to a compensation structure we both like. I'm also asked to help run AM after the deal closes.
The issue I have is, what is the typical capacity within investment firms on the AM side for number of assets per person? Additionally, I am trying to manage how many deals I'd be working on in a given time, so I just don't get in over my head early on. I've run 3 deals concurrently, and I'd say that was my max, but I wasn't managing multiple properties during that time.
I don't want to hire people, as that complicates things before I even leave my FTE. Any advice on how to scale efficiently, so that when I have a consistent pipeline going I can exit my FTE and go out on my own?
I think it would depend on a few items:
What is the size of the client (AUM, units, etc)?
Do you have experience in both AM and Acq?
What is the scope of work they expect you to do in both AM and Acq?
I am currently the director of acquisitions at a $1B aum firm, but my pay is abysmal and I am the only person capable of running a deal at the firm. I run AM on a couple of the deals I've lead.
The size of the clients are weird, so one client has $1.8B in minority GP deals, essentially he puts in 50% of the GP equity, uses his balance sheet as the loan guarantor, but does not operate. He wants to start operating as the whole GP and is building up an AM team. He wants a partner to run his deals with him and head up AM on some of the deals. The other client is Co-GP on deals as well, but does operate on half of the deals he does. He's much younger, but has about $400M AUM.
The bigger client basically wants me to run the deal from once originated through AM, but plans to hire AM people to assist. He did $500m last year in 10 different deals.
The smaller client has a more active role in deals, I'd assist in running the deals, and assists in AM rather than taking the full blunt of the work.
I am not putting any equity in these deals, basically all sweat equity at this point while I build up my net worth.
I see. So would you be taking your current employer's only 2 clients? Also, what is your pay as Director of Acq for a firm of this size out of curiosity?
From what you describe you could probably charge a few thousand per asset in AM fees, but the acquisitions work would be tough. As you know, the acq fees only really come in once a deal is executed, so I'm not sure how you could structure compensation unless it is hourly consulting.
As an operator, a full time gig would be 5 - 10 assets if you are managing and reporting to investors at an institutional level. You also have overhead like AM software, outlook/excel, an internet connection lol ...
DM me and I can connect you to sources who do this work, and provide more color my experience.
No, these are groups that have worked with my firm on a one-off deal, and my firm has turned the corner and are working in a different asset space now. So I don't have a conflict of interest here. My pay is ~$125k/yr all-in, CEO won't give carry to anyone, and work is anywhere from 40-60 hours/week.
So, what was agreed upon was 50% of all AM fees on deals that I am assisting on the AM side with, and 0.1-0.2% of purchase price of acq fees + carry 5-10% of GP promote. I don't receive a salary or guaranteed pay aside from AM fees. But, because I am doing both, I am trying to get a sense of how many I can do simultaneously, between acquisitions and AM. My pay is high on acquisitions though, closing one deal would be $100k + $30k on AM fees, but if it doesn't close I get nothing, which is why I haven't left my role yet.
I think 5 may be my max if I'm also doing acquisitions. Also, like you said, depending on who the investors are, the reporting requirements will differ. My current firm has no AM software, just relies on the PM to do the accounting and putting a cumulative of the financials into spreadsheets for variances and budgeting. We do however have an IR software to communicate with investors the reporting. I would likely push all/some of those costs on to the partners since they are the majority stakeholders in the deals, and my work is not as the group doing the AM.
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