Has anybody here had experience with or know someone who has sold an LOI?
October 25, 2022
by an member in Johns Creek, GA, USA
I recently connected with a smaller sponsor who had multiple offers to purchase his proprietary deal's LOI ranging from $500k-$3M. Just curious as to the mechanics of such a transaction and any stories out there.
Thanks!
from University of Nebraska in Austin, TX, USA
You can monetize an LOI but it comes from structuring the closing in a few different ways. I've seen someone 'sell' an LOI in a few ways: % of transaction value (1% to 5% depending on how good of a deal it is), flat fee ($400K for a $6M EV deal), independent sponsor who literally had no involvement post close (closing fee of 2%, 20% carry, 5% management fee). I've also seen PE firms totally screw over the finder as the finder wasn't thoughtful regarding the paperwork prior to introducing the deal.
from Georgetown University in Bettendorf, IA, USA
I agree with Thomas' statement that in the PE independent sponsor model you get potential operators that find the deal get most of the terms ironed out then shop for financing / partnerships. But as far as I understand it they remain tied to the deal, even operating post close for a time. But if someone's selling an the LOI without the VAST majority of the payout deferred until successful closing (i.e. enhanced finder's fee) then I would be highly skeptical.