Seems like once you reach the VP/Director of Acquisitions level, receiving carried interest as a portion of comp package becomes more standard.
I'm curious as to how this piece of the comp stack is quantified (which I'm assuming could be highly lucrative depending on the performance and number of deals bought/sold).
Is it typically a % of the promote piece that is sliced off and provided? I'm assuming that getting a "piece of the promote" does not require that the employee actually contribute equity to the deal, but rather gets a piece of the back end for acquiring, managing, creating value, and ultimately divesting.
My first is a fairly typical owner/operator using LP equity to capitalize every deal. Value add, generally pursuing deals in the high teens LIRR range in a 3-5 year hold scenario.
Small deal team, I am one of 4 acquisitions VPs. I am in the process of acquiring an off market deal from a group that I used to formerly work for, with the potential to buy additional deals off market from them programmatically. My company is super happy, but the reality is smiles and back patting doesn't mean jack unless there's money to be made. My thought is to ask for a % of the acquisition fee (1%) and a % of the promote. Just not sure how much is typical.
Not as sure about VP/Director level but 10% of net promote for a Principal of Acquisitions is not uncommon. I imagine Director/VP would be 2-5%?
Associate is 0.5%-1% in my experience, for a lower-end boundary.
I want to follow up on CRE 's comment. It really depends on the size of the investment/promote. Obviously having 0.5% - 1.0% of a $10 MM promote and 0.5% - 1.0% of a $100M promote are very different compensation structures. Larger funds/firms will offer associates carry closer to 0.1%. I guess it's hard to offer solid guidance without having a better idea of the size of the deal we are talking about.
Very fair point
Example, last deal we closed was a $30MM value-add deal. Without going into detail, 5-year hold, exit value was $43MM, 18% LIRR using 60% debt. 90/10 JV structure, and my firm did a Co-GP deal where the Co-GP put up 75% of the 10% piece. So our actual GP investment was $300K total. After running the waterfall and paying out the LP and co-GP, the "true promote" piece projected to be $1MM to the GP. Co-GP gets 40%, we take 60%. So $600K of true promote to my firm.
In terms of whole dollars, it's not huge. So I need to be thoughtful in terms of my expectations there.
I wouldn't hesitate to ask for at least 10% of that. Maybe start higher and work your way down. If you really sourced and executed a similar sized transaction I think that's a really reasonable ask.
It obviously depends for all the reasons other people have listed. But the short of it, is 2-5% is normal at your level, or to put a $ value on it, $50-$500k for a single deal, depending on your contribution.
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