Howdy skippy60,
The fee depends on the investment bankers and what you negotiate.
This Triangle Business Journal article titled "Dissecting investment
banking fees" by Jim Verdonik, talks specifically of these issues.
http://www.bizjournals.com/triangle/stories/2000/01/17/smallb2.html
"Investment bankers generally charge three types of fees: cash
reimbursement of expenses, cash as a percentage of the transaction
and equity compensation.
...
Some investment bankers charge expenses that exceed the actual
expenses related to the transaction.
...
Percentages vary from one deal to the next, but the range for a
private placement is generally 5 percent to 10 percent.
...
For larger deals, therefore, a 'Lehman' formula is sometimes used
which charges a lower percentage as the amount raised increases.
For example 5 percent of the first $1 million dollars, 4 percent
of the second $1 million dollars ...
...
The 'Double Lehman' formula uses 10 percent, 8 percent ...
...
The dollar break points at which the percentage is reduced are
negotiable and vary from one deal to the next.
...
Most equity compensation paid to investment bankers is in the form
of warrants. The warrants are generally for a number of shares equal
to between 5 percent and 10 percent of the number of shares sold in
the deal by the investment banker."
This fambiz.com article supports the above fee structures, as well
as it all being variable and there being other fees.
http://www.fambiz.com/Orgs/Oakland/broker.cfm
"Transaction fees for merger and acquisition transactions are
typically based on the Lehman formula. The fees are based on the
size of the transaction and decrease in a step like fashion and
are paid at the completion of the deal.
...
In more complex transactions, deal makers may charge 1.5 times
Lehman.
...
In addition, investment bankers generally charge sellers upfront
fees for preparing a company's strategic profile and appraising its
value.
...
These consulting fees can amount to $20,000 plus for a detailed
valuation report. Generally, the consulting fees are non-refundable
if the firm which retains the investment banker does not consummate
a transaction."
This Triangle Business Journal article by Jim Verdonik and titled
"No reason for surprise when detailing fees" has some good tips on
how avoid surprises when establishing the fee structure.
http://triangle.bizjournals.com/triangle/stories/2000/03/06/smallb2.html
"- Specify in the contract a target valuation, types of investors,
target date and primary terms.
- Structure a fee that rewards the investment banker for bringing a
deal that meets the agreed specifications and provides a lower fee
for a deal that does not meet the specifications.
- Be prepared to meet resistance to this concept when you propose it."
There might be ways to save on the fees; the Jacobs Capital, LLC
firm has a "Sale by Owner" option.
http://www.companyxchange.net/WWW/Owner/PrivateEquity/index.asp
"The 'Sale By Owner' approach, where the client plays a more active
role and saves one-half the fee."
"Success Fees" charged are outline here.
http://www.companyxchange.net/WWW/Owner/PrivateEquity/DealParameters.asp
"Our Success Fees are due only upon the successful closing of a
transaction. The fees are based on the amount of capital raised
and are competitive with market rates. The success fees for the
Sale by Owner approach are one-half of the Full-Service approach."
Money has gotten tighter since the "boom" days, so depending on
the corporation, etc. the fees could run higher, at least according
to this Great Communications article.
http://greatc.net/news_02-08-18.html
"Fees decline for raising larger amounts - 8% for raising $2-5 mm
and 4-6% to raise more than $5 million.
...
... some deals are really creative, with floating percentages of
cash and warrants depending on the amount raised. For example, I
see deals for 13% cash with 7% warrants if $1 mm is raised. For
$3mm, the terms shift to 11% cash with 5% in free trading stock."
And then there are legal fees; from the same article.
"In general, companies should budget for legal fees 1% of the amount
to be raised ..."
You should read all of the articles in their entirety to fill in the
details of the fee structures, etc.
If you need any clarification, feel free to ask.
Search Strategy:
Google search on: "investment bankers" fees
://www.google.com/search?q=%22investment+bankers%22+fees
Looking Forward, denco-ga |
