Typical legal fee for a deal?
February 13, 2024
by a searcher from University of Northern Colorado - Kenneth W. Monfort College of Business in Denver, CO, USA
What are typical costs for legal fees in a deal?
February 13, 2024
by a searcher from University of Northern Colorado - Kenneth W. Monfort College of Business in Denver, CO, USA
What are typical costs for legal fees in a deal?
from Columbia University in Oakland, CA, USA
Financial criteria are only part of the equation, but I tend to view deal sizes over ~$4M or companies over ~$1M in Adj EBITDA as the entry point to "lower middle market" deal terms. On those deals I'd echo my partner Zach's remarks above on typical deal fees and the virtues of finding service providers that can provide fixed fees, or at least some visibility into their billings before they balloon past your expectations as a client.
On the "small business" end of the spectrum, I think legal fees can (and should be lower) and analogous transaction expenses like QoEs are usually overkill. A transactional lawyer with middle market PE sensibilities but the bedside manner to not try to over-engineer the deal can be incredibly valuable getting the deal done (or not) at the right level of granularity for documentation and due diligence. Occasionally these small business deals can go sideways when buyers and sellers try to introduce features or terms that may be common upmarket but serve to bust simple deal docs (and run up fees) when applied to smaller companies with comparatively unsophisticated legal and financial materials to produce during due diligence. It can be helpful to talk with your counsel about the risks you're trying to mitigate or benefits you're trying to capture, and see if there are ways to reflect these concepts in simple deal documents before getting carried away.
Finally, I think it's always important to have a view for how you -- and your investors -- intend to generate value in the business while operating it (e.g., through operational improvements or M&A) and how to realize that value for yourselves (e.g., through dividend distributions of excess cash, a levered recap, a sale, etc.). Probably obvious, but the "how do you get your money out of the deal" point should animate the both your acquisition criteria and your approach to legal documentation and due diligence.
in Tasmania, Australia
I'm currently looking at this for Australia.
When chatting to potential 'legal partners' I found it helpful to divide the work scope into distinct phases as applicable to your search type, and divide LEGAL from FINANCIAL:
For our own traditional partnered search:
LEGAL
1. PRE-SEARCH PHASE LEGALS (INVESTOR SEARCH):
First Drafts of:
*Fund structuring (ours is Long-hold Holdco);
*Shareholders agreements
____Estimate up to 15K AUD?
2. SEARCH PHASE LEGALS (INVESTOR BACKING SECURED): Final Drafts:
*Fund structuring *Shareholders agreements
*Entity registration and legal local compliance
------ Estimate up to 35K AUD? 3. ACQUISITION PHASE LEGALS:
*Final Acquisition document drafts post negotiations
(Fee paid on Settlement)
------ Estimate up to 15K AUD?
4. OPERATING AND ONGOING LEGALS: *Monthly retainer OR as needed
(depending on acquisition size and industry/business/product complexity)
------
FINANCIAL
2. SEARCH PHASE FINANCIALS (INVESTOR BACKING SECURED):
FDD separate with consulting independent CFO:
*Debt Advisory
*FDD (Broken Deal Costs x 2)
*Strategic Deal Review
*TAX Structuring
----- Estimate I have seen is up to 30K AUD
4. OPERATING AND ONGOING FINANCIALS:
*Ongoing Cashflow modelling *Quarterly GST Activity Log *Income Tax returns###-###-#### Estimate I have seen is around 2K AUD / year
That said, I may well be wrong, and these estimates will vary depending on detailed scope and amount of 'face time' expected.
I'm looking for Legal and Financial partners who will walk this journey with us.
Please contact me redacted (personal email) if you are a Legal or Financial expert in this space and interested in working with us.