Standard equity finder's fee agreement?

searcher profile

May 17, 2021

by a searcher from University of Virginia-Darden - Darden School of Business in Salt Lake City, UT, USA

Here's the situation: I am bringing a deal to some investors that I think they'll really like. We will all invest cash and they will help operate the business as partners.

Question: Is there any kind of standard equity-based finder's fee? For example, a Lehman agreement is generally considered a standard for a cash payout. However, what I want is some equity in addition to the equity I'll get from my own investment. Someone told me 15%, but that seems really high.

Once again, I'm looking for an industry standard, if such a thing exists in the search world, not to negotiate this to the max. I want to be compensated fairly without beginning a new relationship that way.

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commentor profile
Reply by a searcher
from University of Pennsylvania in Dubai - United Arab Emirates
In a similar situation I used an approach close to what Lou suggested above but i asked for "deal equity" at 2x the cash value. My logic was that i was taking risk by keeping money in a deal where i was not in a position to influence the outcome. At the same time i was helping the buyer by reducing their cash outlay which was relevant in this case.
commentor profile
Reply by an investor
from Harvard University in New York, NY, USA
Think about calculating the Lehman fee and then applying that to the capital base to effectively "invest" your Lehman fee into equity. Example: Lehman fee = $150k...deal equity is $10,000,000...you would get 1.5% of the equity.
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