Current Market Price for Finder's Fees
June 05, 2018
by a searcher from Harvard University - Harvard Business School in 2613 Highland Haven Dr, Austin, TX 78725, USA
What is the current market rate / structure for a finder's fee? I'm not referring to a retained buy-side broker, but more of someone that makes an introduction, and earns a contingency fee if the deal closes. Thanks in advance for your perspective.
from Grantham University in Naples, FL, USA
a. “Sliding Scale Model”
i. 5% of that portion of the Gross Aggregate Consideration between $0 and $1,000,000 arising from the successful Transaction;
ii. 4% of that portion of the Gross Aggregate Consideration between $1,000,001 and $2,000,000 arising from the successful Transaction;
iii. 3% of that portion of the Gross Aggregate Consideration between $2,000,001 and $3,000,000 arising from the successful Transaction;
iv. 2% of that portion of the Gross Aggregate Consideration between $3,000,001 and $4,000,000 arising from the successful Transaction; and
v. 1% of that portion of the Gross Aggregate Consideration above $4,000,001
b. “Fixed Percentage Model”
i. 1.00% of the Gross Aggregate Consideration.
The first successful Transaction will use the Fixed Percentage Model. Each subsequent successful Transaction consummated after the initial successful Transaction will be calculated using the Sliding Scale Model, but not both or any combination of the two.
NOTE: For Targets represented by a sell-side advisor, the Finder Fee will be equal to 50% of the Finder Fee calculated according to the applicable model.
Commission Chart example:
Purchase Price
$7,000,000
Threshold - Threshold - Rate - Commission
$0 $1,000,000 5.00% $50,000
$1,000,001 $2,000,000 4.00% $40,000
$2,000,001 $3,000,000 3.00% $30,000
$3,000,001 $4,000,000 2.00% $20,000
$4,000,001 $5,000,000 1.00% $10,000
$5,000,001 $6,000,000 1.00% $10,000
$6,000,001 $7,000,000 1.00% $10,000
Total Commission $170,000
from University of Pennsylvania in Indianapolis, IN, USA
If a group balks at a premium finders fee, then they will probably not win the deal/execute well anyway because they are going to nickel and dime themselves out of the deal. On the other hand, if you can get a Lehman with a group that has a high close rate, that is more valuable than a 5% deal with a group that only closes 25% of the LOIs they issue. <-- Ask that question...what is their close rate.
Always try to get a point of equity at least.