Insights on Deal Incentives for Intermediaries

searcher profile

June 25, 2024

by a searcher from University of Virginia-Darden - Darden School of Business in Washington, DC, USA

I'm exploring the best ways to incentivize intermediaries, such as river guides and other parties who can naturally generate proprietary deals.

What are the typical incentives offered in these scenarios? For instance, I'm considering offering 0.5% of the deal value and an opportunity to invest in the deal. Would this be considered a competitive and attractive offering? Additionally, are there other structures or incentives that have proven effective?

Any insights or examples would be greatly appreciated!

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commentor profile
Reply by a lender
in Stuart, FL, USA
What happens if the business broker you're working with or one that you think you would like to incentivize just sucks at their job and provides you with no value to what you're doing?

If you want to incentivize the average business broker, you should come to the deal prepared to show the broker and the seller that you're willing, able and capable of buying the business you're looking at.

I've said this before on this site, but one way to do that is to provide them with a good resume, your personal financial statement, proof of funds that you can complete the transaction and/or a good solid letter of proposed commitment from whatever fund you are working with, and a copy of your credit report or a screenshot of your credit scores.

As a previous business broker, I'd be much happier with this buyer than someone trying to buy me a cruise that I might not even enjoy. I'd rather make the money on the deal and decide where I want to go on vacation.
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Reply by an intermediary
in Campbell, CA, USA
We normally aren't paid on the buy side, so I assume ^Justin Crandall's percentages are customary. Intermediaries are the only professionals in a deal who are only paid if it closes so we have a natural tendency to look for fair and equitable solutions to put the deal together. Attorneys, on the other hand, are incentivized to bill more hours, which can lead to ridiculous one-sided deal terms that keep the documents bouncing back and forth and they get paid whether or not the deal goes together. If you really want to do something nice for intermediaries, negotiate and make your own decisions about deal points and control your attorneys.
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