Standard equity finder's fee agreement?

by a searcher from University of Virginia-Darden - Darden School of Business

2 years ago

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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searcher from University of Pennsylvania - The Wharton School

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.

2 years ago | like reply | 1 like

investor from Harvard University - Harvard Business School

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.

2 years ago | like reply | 1 like

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