REFERRAL FEE AGREEMENT FROM A SEARCHER
I'm a searcher and I'm running into deals in the $3M - $6M EBITDA and $10M - $20M revenue range. These are mature SaaS software businesses with healthy metrics. Given where the market is today, the seller's expectation/ask is beyond reasonable search multiples and hover around 5x of revenue. They actually have offers and valuations analyses by intermediaries putting them in this range (not just an unreasonable seller ask as we see sometimes). These companies check the boxes for low customer concentration, good product, 90% or more revenue retention, 10% or less customer churn, 25%-35% EBITDA margins, and between 10%-20% historical growth over past 3-5 years.
To the investors in this group - If such deals fit your criteria, would you be open to a 1-Lehman (https://en.wikipedia.org/wiki/Lehman_Formula) referral fee agreement upon closing for such deals?
To the searchers - As a searcher in the search phase referring a deal due to it being expensive may give us mixed feelings. A part of us will want to explore the deal ourselves and seek capital beyond traditional funding sources. Another part may feel it is unrealistic to create personal alpha with such high multiple and equity in the deal - especially as a traditional funded searcher. How would you think through this?