Legal/CPA Costs in LOIs

searcher profile

February 28, 2023

by a searcher from George Washington University in New York, NY, USA

Hi, I'm curious how most people handle legal/CPA costs when LOIs fail to make it to closing. It seems normal to tie legal/CPA costs to the closing fees at deal closing but what happens when deals fail to make it to closing? I'm curious if people have to pay minimums or if the costs are just built into the next deal.

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commentor profile
Reply by a professional
from Boston College in Baltimore, MD, USA
I agree with ^redacted‌ from the advisor side. Many advisors will be open to writing off certain fees, broken deal discounts and/or rolling fees into a successful deal. We view legal work on a LOI for a searcher (or independent sponsor) as an investment in the client and the relationship. We vet our clients on intake and are often willing to eat the cost of the LOI if the client does not get the deal. I don't know if that's market or not, but I'd ask up front how your advisers will handle broken deal costs at various stages.
commentor profile
Reply by a professional
from Tulane University in Portland, ME, USA
Hi, typically for financial due diligence we operate on an a fixed fee basis, however if deals fall through we pro-rate for the amount of work provided so far. Hourly is also a possibility.

In rare cases where a long-term relationship is established, we will carry this forward to the next deal.

Generally we are more flexible than most in the market who tend to just be hourly or fixed. Please reach out for more details!
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