hey guys,
I need to find stats on single-deal compensation.
Hope you can advise.
My co-worker just closed a deal that netted our firm (a large family-owned real estate developer/owner) about $12mn without us putting any money at risk.
Basically he found a big deal, and since we're too small to do the deal ourselves, he introduced a PE fund to be our co-investor. Sensing correctly that our cheap-ass founders probably would walk away from the deal for fear of putting their own money at risk, my colleague structured a finder's fee into the deal, due whether or not the deal closed.
So we are walking away, and the PE firm is paying 0.5% of the deal - netting us $12mn.
Management has asked me to benchmark how much deal-based bonus and annual bonus he should get, as right now, we have neither. Our annual bonus is 0. We're paid $200k as director-level employees.
Many thanks.
A foreword.... Someone making $200K while bringing in this kind of production / doing this kind of work with no structured bonus/commission agreement puts up a ton of red flags to me.
Getting to the question at hand, on a deal that size I agree that anything under $1M would be absurd. Candidly I think that 25-30% would be fair. In a lot of cases, acquisition fees on a deal are anywhere from 25-100bps depending on many factors. Let's take the median view that it's 60ish bps as industry 'average'. So 60 bps on 2.4 B is $14,400,000. You could argue that they are light to begin with. It's really a mixed bag, as I know a lot of different comp structures and all-in figures from different firms/colleagues. I think that $4 M would honestly be fair.
Just to give you a frame of reference, and I know it's a little different because it's on the brokerage side, but there's a large transaction scheduled to close soon (call it $2 B) and they are paying the broker a full 100bps on it. Not a typo. Now, obviously that gets split a lot of ways, but for discussion purposes I'd argue that at worst, each of those brokers was probably walking away with safely 2-5 M depending on how many mouths were on the team. Since your co-worker basically acted like an inside broker on this deal, I think that $ range is fair. The company still gets a shitload of money and your friend also gets a huge pay-day. They won't end up giving him that much, which is fine, but you can say you went to bat for him and hopefully he returns the favor.
At my firm if we source an off market deal based on our own relationships then we get 30% of the acquisition fee. Doesn’t matter if you’re an analyst or the CEO. You and your coworker should ask for 30%, and then take the money and spin out into your own GP. $3.6M can become $72M of equity with a LP. $72M can leverage up to $180M of buying power assuming 60% LTV. Seems like you already have a LP you could JV with as well.