Modeling a deal fee for independent sponsors

searcher profile

June 11, 2022

by a searcher from Columbia University - Columbia Business School in New York, NY, USA

In an independent sponsor transaction, how is a rolled deal fee modeled in sources and uses?

Does it come out of the capital provider’s (say an SBIC) equity or total equity (including a roll).

I am trying to understand if this would be dilutive to a seller rollover.

Thanks!

1
3
182
Replies
3
commentor profile
Reply by a professional
from Dartmouth College in Los Angeles, CA, USA
Agree with Dan on the total equity, it does not typically reduce equity from the capital provider. Priority between the pref, the sponsor rolled deal fee and the seller rollover is what is typically negotiated and m0re variable. The tax point is key since if you want to avoid income tax on the rolled fee you have to structure this from the beginning of the transaction
commentor profile
Reply by a searcher
from University of California, Santa Barbara in Los Angeles, CA, USA
Total equity usually; key question is also where the rolled equity sits in the preference stack; if pari with the money than the fee is usually taxable income to sponsor; if behind pref, then equity can be not taxable but obviously that rolled equity is more at risk
commentor profile
+1 more reply.
Join the discussion