Managing Diligence Cost

searcher profile

December 19, 2024

by a searcher from University at Buffalo, State University of New York - School of Management in Herndon, VA 20170, USA

Starting DD on my 1st acquisition. My lawyer indicated, quote:
"I don’t typically do a ton of review of the documents, contracts, etc., and mostly serve as a spot checker on particular items that the client wants me to review"
Then indicated the estimated cost for his legal DD is $20K - $25K. I don't mind paying money for diligence, but I expected more legal support $20K. Is this cost reasonable for the stated level of service?

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commentor profile
Reply by a professional
from Dartmouth College in Los Angeles, CA, USA
My guess is that the lawyer is quoting that for the deal itself (document drafting and negotiation etc.) and is saying that for smaller deals (which I'm assuming this is) he usually doesn't do much legal diligence because there isn't much to do on these businesses, and buyers in this space are usually willing to assume more risk than a corporate acquirer to save on costs. Quote is in line with typical legal fees for the deal, assuming sub $5mm deal. I could be wrong though.
commentor profile
Reply by a professional
from Bentley College in Miami, FL, USA
Broadly speaking, here are the all-in legal fees that you should expect to pay:

- $500k to $1M EV: $8k to $12k
- $1M to $2M EV: $10k to $15k
- $2M to $5M EV: $15k to $25k

This is for a standard transaction, basic searcher deal, working with an independent M&A attorney or boutique firm. Not talking about real estate, investor documents, labor unions, regulated industry, etc.
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