Compensation For Bringing Me a Company

searcher profile

January 04, 2022

by a searcher from University of Gloucestershire in Toronto, ON, Canada

A fellow searcher has brought me a very nice business which he has under LOI and can't commit to for legitimate reasons.

I am a single sponsored searcher and have no major acquisition funding commitments and I have room for flexibility in structuring my fellow searcher's compensation.

What are the typical forms of compensation for bringing someone a business? What are the positives/negatives to giving equity vs a fee? What ballpark should I be expecting to offer as compensation?

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commentor profile
Reply by a searcher
from Harvard University in Seattle, WA, USA
A signed LOI deserves a lot more than a finders fee. They've put in the legwork to meet the broker and receive the deal, meet the owners, vet the opportunity, and come to agreement on price and terms, all in a competitive landscape. Depending on where you are at in your search and if this deal fits well with what you want, this would be worth some single digit or low double digit % of equity. The trickiest part will be transitioning the LOI from the other searcher to you without spooking the owners.
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Reply by a searcher
from Texas A&M University in Elizabethton, TN, USA
You could offer $10k finders' fee, contingent on closing deal. If there are any broken deal costs offer to pick up 100% of those (QoE, appraisals, etc), also contingent on close. Better than your colleague left holding the bag with a bunch of payments to be made and no deal.

Maybe they would co-invest with you and put money in as well? If you are not going to have many investors, a finders fee may be better than giving out equity in the long run, if you don't know them very well.
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