Finder's fee agreement - enterprise vs equity value base

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November 28, 2022

by a searcher from University of Ljubljana - Faculty of Economics in Slovenia

Hey SFs!

What would you say, how common are Finder's fees linked to equity value (rather than enterprise value)? What are the market rate % in this case? Any tips on how to address potentially changing financing structure well? Can you perhaps share some agreement that you find relevant in this context?

I personally always prefer a "Lehman scale"- based approach linked to aggregate consideration (cash-free, debt-free basis). However, from time to time I come across people that expect a flat % rate linked to equity value ...

Any advise is welcome. Thanks!

Kind regards, Peter

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Reply by a searcher
from Princeton University in Annandale, Clinton Township, NJ, USA
Finder's fees would be based off of enterprise value most likely. I doubt anyone would agree to a finders fee based on equity value since it could fluctuate dramatically depending on the capital structure used to acquire the deal. In the middle-market PE world, I remember finder's fees could be 1-3%. I'd imagine they might be high end of that range or even higher at this end of the market.
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Reply by an intermediary
in London, UK
Here's a good post on finders fees: https://www.hadleycapital.com/insights/small-business-private-equity/finders-fee-agreements-in-small-company-acquisitions
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