Buy-side broker commission structure

by a searcher from University of Pennsylvania - The Wharton School

2 years ago

I have a friend looking at a business to purchase, and has been approached by a buy-side agent who would like to represent him.  The agent has offered no retainer up front (for other businesses if this one falls through), and a structure of ~6.5% on the first $5M, 5% on value between $5M-$10M, 4.8% from $15M-$20M, and 4.6% $20M+.  This seems high to me, but would welcome input here.  

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14 comments

intermediary from Pepperdine University

I'm a buyside "broker" specializing in health care services usually for large PE funds searching for proprietary add-on opportunities for their established portfolio companies. Many of the big funds have standardized contracts. Whether it is their contract or mine, it is usually Lehman (5,4,3,2,1) and I try to drag the 2% up to $20MM or so and then 1% after that. Although I've had some PE groups offer up as much as 5% for proprietary platform deals, the fees described above seem wickedly out of market (but I'd love to have them!). I'd be laughed at if I ever asked for them from my client base.

Lot of sketchy brokers out their with horrible contract terms trying to take advantage of the novices.

2 years ago | like reply | 2 likes

professional from University of Southern California - Marshall School of Business

There's a big difference between agents/brokers and non-contingent fee advisors. It's a good idea to know the difference. As for paying finders, big risk. Know what can go wrong before hiring anyone to search/find for you. Email me for my confidential report: "Confidential Warning About Outsourcing Search to Deal Finders."

I recommend that searchers do whatever it takes, from the get-go, to meet sellers and potential sellers. Including outsourcing admin, marketing, searching, whatever, to people/organizations that can help the searcher achieve done deals sooner. But, beware the details.

2 years ago | like reply | 0 likes

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