What are the Standard Attorney Fees from Start to Close?

searcher profile

January 03, 2023

by a searcher from Brigham Young University in Salt Lake City, UT, USA

Hi all, curious how much to budget for attorney fees. Would anyone that has closed a deal mind sharing their experience and how much they ended up paying? Thanks!

[Apologies if this has been asked before but a quick search didn't yield any results.]

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commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
We have financed many deals in this space, and I can tell you we have seen total legal bills as little as $2,500 and as high as $200,000 for acquisitions on deals under $20 million. The cost on the legal really depends on a number of things. First, how involved is your attorney. If you are with a larger law firm and you have them looped in on every email and every communication, you are going to get billed for all of their time reviewing it. In some cases things are contentious and you need your attorney involved. But if there are negotiations you can handle directly through the broker or the sellers and avoid the attorney handling those negotiations, it is going to save you a substantial amount of money.

There are attorneys that will quote a flat fee for legal work on acquisitions. I typically see those fees run between $5,000 and $30,000. However, I have seen attorneys come back and charge more if the base hours included in those fees are exceeded. Although legal can be a huge cost, I typically do not recommend just using the cheapest attorney. You want to be sure your attorney knows what they are doing. If they do not, it could cost you way more in the long-run. To pay a bit more should not be a big deal with that in mind. I would suggest when negotiating to do so with a cap in place that your attorney must notify you if they are going to hit it or be above it. That way you can control the hours to an extent, but you also have your attorney working when they need to be working. If they underquote you, you might not get the service you expect as they might cut corners.

The deal I saw at $200,000 took a long time to close, there were massive changes, and for a $2.5 million loan, the buyer was not aware the attorney really over documented it. I think the final purchase agreement was close to 200 pages. It was overkill for the deal size. But I would say that is a rarity. Most attorneys are going to get paid what they deserve for the hours you engage them to work on something. The good attorneys should have generic formats for APA's and contracts, which should make it more affordable. I hope this helps. Again, coming from the lender perspective based on what I have seen on closing statements. There are plenty good and affordable attorneys out there.
commentor profile
Reply by a professional
from Marquette University in Kirkland, WA, USA
So we have answers of under $5K to $150K - not much consistency. It depends on the law firm and deal size. You don't want a middle market firm working on an SBA size deal. Let's assume you have the right attorney, he/she is efficient, then your biggest variable is how well the attorneys play together. If the other attorney red-lines every paragraph your fee will be much higher. If they negotiate for the sake of negotiating (meaning they want almost zero risk for their client and almost all on you) your fee skyrockets. That said, figure a good starting point is $10-20K for a $3-7 million deal.
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