Looking to hire an M&A attorney for a sub-$5MM deal. Estimated legal costs?

January 08, 2021

by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management in Los Angeles, CA, USA

Looking to hire an M&A attorney for a sub-$5MM deal, no regulatory or environmental issues. Anticipate debt financing + equity raise from investors. Any idea on what kind the total legal bill I can anticipate? CPA quotes have a pretty wide range and I have settled for a middle of the road option.

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Reply by a searcher
in Boulder, CO, USA

Without knowing too much about your deal, I would start with a rough estimate of $10-50k for legal on that size of deal, but allow for a 1% deal contingency for all soft closing costs against the overall purchase price. The final legal bill would obviously depend on many factors including the market your lawyer is in (NYC vs Wyoming), how much you are expecting the lawyers to ultimately do (e.g., just draft LOI and purchase contracts, or detailed contract reviews during due diligence), the complexity of the actual transaction (100% asset sale vs. stock sale, equity for seller, clawbacks or buybacks), real estate, the sell-side lawyer's credentials, and how much involvement you intend to have over due-diligence and redlining and negotiating all the purchase agreements. I've had corporate lawyers argue for days over the inclusion of a single word in a 30 page contract. I reviewed the language, accepted that there was little risk to this one word, and instructed the legal team I was willing to accept the risk and move on. At $450/hr that redlining cost my company $5k dollars for maybe $1k of potential risk. Like the CPA firms, the best advice is to talk to a couple of firms and ask them how many deals of this size they have done in the last 2-3 years, on average what they've charged for similar size deals, what services they provide for that rough estimate, who will be on the project (partner vs associates), what their rates are, etc. That should quickly show you any major outliers. At some point, though, the cost becomes irrelevant and it's more valuable to utilize someone you trust and work well with, especially if it's your first acquisition. Good luck!

Reply by a professional
from University of Minnesota in Minneapolis, MN, USA

Some really great input from ^redacted‌ above. Get a lot of free consultations and pester those lawyers about 1) price - be clear about any limitations or expectations up front, some lawyers are expensive, and some lawyers are insanely expensive; and 2) specific experience - I think M&A experience is very important (obviously) but also specific M&A experience at this price point, which is something of a different animal.

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