Mgmt fee & annual bonus for single searcher

February 03, 2025

by a searcher from INSEAD in Paris, France

Hi,

Asking for a friend =>

"I'm buying a company with an investment fund (I'll have 30%). It is not really a search fund as I have to put up equity for the shares, I will not get them "for free" like in the search fund model.

I will be negotiating my comp package soon. I am looking for benchmarks on mgmt fee & annual bonus. The company has aprox €6m revenue and €1.3m ebitda; 10 FTE."

Would 125k be market practice for mgmt fee ? Indexed by 3% every year ? What about the annual bonus ?

Cheers,

François

Reply by a professional
from Dartmouth College in Los Angeles, CA, USA

Overall package has to be viewed in context of what your actual role will be. If you are serving as CEO, it's not really a management fee but a bonus. In either case I agree that $125k off $1.3mm in EBITDA is high, but since it seems like you aren't getting any carry it might be justified. But it depends on your salary and other comp. If you're a sponsor and won't be the CEO, 5% of EBITDA is a more typical management fee, but it varies depending on what your carry/promote and closing fee will be.

Reply by a searcher
from TELECOM School of Management in France

Mngt fee is online with what I have seen, maybe a tad high. Indexing it shall be left to the board decision: anticipating inflation rate is an art as much as a science. Bonus shall be derived from the BP and the target EBITDA for the next 5Y, with some kicking it once reaching over 120% of the goal, with several steps, but capped (X€ if reaching fromm 120 to 130%, Y€ from 130 to 150, Z over 150%).

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