How much should a Managing Diretor doing sell-side M&A at a small lower middle market boutique (15-20 total team members) bring in every year in fees if the average deal size is $10M - $20M?
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I’m struggling to understand your question. Is it how much they should? How much they could? How much they would be able to earn?
They “should” be able to bring in enough to keep the firm afloat. At 20 people making an average of $175k base per year, they need to bring in $3m in fees. Add another $1m for rent, admin, software, etc. Call it $4m.
Well, here’s some more napkin math for ya.
Assume fees are 2.8% + monthly retainer of $5k. (This is ballpark what we would charge for this size) Average deal takes 8 months to close.
On a $15M EV, that equals $460k in fees.
So you basically need to close 9 deals to turn a profit, and all the excess can go towards bonuses for yourself and your team.
If you have 18 people on execution (not including yourself), and with deal teams consisting of an Analyst, Associate, VP, and yourself. I reckon that’s 6 deal teams.
Assume each deal team can close 3 deals per year. Meaning you have a max capacity of 18 deals, and if every deal is $15m then your max fee amount is $8.2m.
Not a bad way to make a living, as you can probably keep a few mil of that for yourself.
That's very helpful - thanks. Just playing devil's advocate here, 3 deals / team seems light especially at a $15M EV. I would think at that deal size assuming the firm has good marketing a team could do 5-6 deals / year. Let me know your thoughts.
I also get the sense from talking to others in the industry that an MD at boutique should bring in $4M - $5M in total fees per year.
As with anything, it depends. If you're going to do a small profile, cleaned up financial workbook, and then post it on BizBuySell & your website followed by minimal handholding throughout the closing process you can do many more deals. If you want to work your juniors hard you can churn these deals out like its nobodies business. You could absolutely close more. But you're pretty much a business broker at this point.
But, if you want to be a legit investment bank doing white glove service the whole way through it is much more intensive. Long buyers lists of strategics for outreach, comprehensive CIM to maximize auction price, shortened deal timeline, handling all the buyer contact on behalf of your client, etc., all takes time.
Keep in mind that the more deals you're on, the harder it is to remember the minute details of your clients. I work at a smaller boutique, we staff juniors on 3 deals each max, and everyone works 50 hours a week on average. I can tell you everything about all 3 deals I'm on. But if I'm on 9 deals then no shot in hell.
You can absolutely clip $4-$5m as an MD at a boutique that just churns deals out.
That's great insight and very helpful. When you talk about less of a white-glove approach and churning out deals what average enterprise value do you think that's achievable at? Are these $10M, $20M, $30M deals?
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