Search Fund and IS Legal Engagement Structures

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by a searcher from University of Virginia-Darden - Darden School of Business
in Virginia Beach, VA, USA

6mos ago

Search Fund and IS Legal Engagement Structures

I'm looking at deals at a variety of sizes given my geographic focus and, as such, am open to both a self-funded search fund and independent sponsor model. Curious on what legal engagement letter terms typically look like (or should look like) for these models. Obviously there may be hourly rates, but do people have examples of how failed deal fees are charged, etc? I know McGuire Woods is a thought leader in the IS space, so curious if others have worked with them and understand how they communicate cost upfront (along with leaders in the Self-Funded space). This would all help me educate the advisors I've worked with in the past on more traditional M&A deals (strategic/PE).

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reply by a professional 5mos ago
from University of Illinois at Chicago in Chicago, IL, USA

Thanks for the tag ^redacted‌. I lead Levenfeld Pearlstein's Independent Sponsor Practice. We are a full-service firm with a very active independent sponsor practice. I've been working with independent sponsors for almost 15 years. We offer customized and very accommodating billing arrangements to our independent sponsor clients, including no retainers, deferred billing, and broken deal discounts with the balance rolled into the next deal. We work off of budgets and have arrangements that fit first timers pursuing their first deals in the $5-20M range as well as established sponsors pursuing $30-$50M+ transactions. We also stage our workstreams so that the bulk of the legal work is done after QofE/financial DD is complete and, ideally, also after capital has been circled, so that there is a greater degree of deal certainty before those costs are incurred. Happy to chat further if there are any questions. Feel free to DM or email me at redacted

reply by a professional 5mos ago
from University of Notre Dame in New York, NY, USA

Thanks for the tag ^redacted‌. We’re very active in the independent sponsor space, especially in those “tweener” $10–25M EV deals, and we’re probably on the more aggressive end of fee structures relative to other firms. Typical approach for us on IS deals: • No retainer and no milestone payments • If a deal breaks, we’ll roll 100% of our broken-deal fees into a future deal (to the extent equity investors don’t cover some portion) • We usually cap total legal fees at ~0.5%–1.0% of purchase price on an IS deal (closer to 1% on a smaller IS deal) • Like a few other folks mentioned here, we also stage engagements so substantive legal work doesn’t begin until QoE and financial/tax diligence are complete, which materially reduces burn on deals that don’t make it past that point One broader point for IS deals when choosing a law firm: this isn’t an ETA deal structurally. You’ll almost always need multiple practice areas in-house beyond straight M&A. At a minimum, you need a strong finance/lending team that’s comfortable negotiating covenant-heavy credit docs, plus tax. Depending on the deal, you’ll often need employment, benefits, real estate, regulatory, or industry-specific expertise as well. Stitching that together across firms mid-deal is usually where costs and friction spike if everyone isn’t under one roof. Happy to compare notes offline if helpful. Feel free to DM me or shoot me an email redacted