Self funding costs (legal/accounting) prior to acquisition?

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April 07, 2022

by a searcher from University of North Texas in Austin, TX, USA

As part of building an acquisition team you need a good lawyer and accountant (others?) so I'm wondering how you should plan for pricing for those people. Do they charge per company due diligence they do and is cost typically tied to the value of the purchase? Any other insights here as I work to understand the costs aside from the cost of the business that need to be planned for?

I'm brand new here (excited to be in this great community too) and hoping to purchase a business in the next few years via self funding.

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commentor profile
Reply by a searcher
from University of Florida in Boynton Beach, FL, USA
2-3% of transaction size is a good rule of thumb, and probably good to plan for 2 broken deals and 1 closed deal (3 total). That's probably a very conservative budget for self-funded, since you would schedule your diligence providers to kill deals early/cheaply once under LOI. You may also find some providers who will roll deal costs until closing (including broken deals) but you'll end up with fewer to choose from and you'll pay extra for their risk.

What I will say is don't be shy calling up several accountants and lawyers to interview - pricing & expertise varies widely. Just make sure your partners are appropriate for the deal. If you're buying a $1mm landscaping business with your own money you might want a small local lawyer who will charge you $10k. If you're buying a $10mm regulated business and raising outside capital you might want a search fund lawyer at a mid-sized firm who will charge you $100k.
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Reply by a professional
from Bentley College in Miami, FL, USA
DueDilio can help with this. We're an expert network specifically focused on M&A due diligence. We connect business buyers with pre-vetted due diligence service providers. Our large and growing network of independent professionals, boutique, and mid-size firms specialize in finance, legal, technology, commercial, and other key areas of business diligence.
We've seen over 140 DD projects over the last year and happy to share some pricing details with you using all the data we have collected. Feel free to reach out to redacted a rough guide on costs, check out this newsletter post: https://www.getrevue.co/profile/smb_attorney/issues/smb-twitter-legal-m-a-masterclass-session-9-w-special-guest###-###-####
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