Today, our firm officially announced the launch of a new pricing program for sell-side M&A advisory services; we call it the 2% Solution.Investment bankers and business brokers for years have used a variety of pricing formulas, including the Lehman Formula and multiples of the Lehman Formula for pricing middle market M&A advisory services. Fees run up to 15%. Even on transactions approaching $50 million in value, some advisors are charging as much as 5%. These fee arrangements typically include a large up front retainer--or in some cases a "valuation fee."
At Thorpe Capital Group, our new 2% Solution pays us just 2% of the deal, less credits for monthly retainers of $5,000 per month. Our minimum fee is $100,000. The offer is subject to other terms and conditions.
Our hope is that this new structure will be more affordable and simpler to understand. We hope that this will allow some companies who have either gone without help at all or who might have utilized more expensive resources.
What do you think? Is this pricing appealing?
To people just entering this universe, I am certain that the transparency of this pricing plan will be a god-send... I remember when my first venture ( I co-founded a small software company back when it wasn't cool ) started looking for a buyer there was a lot of apprehension. Luckily, our principle was a good balance of savvy and pluck.
Of course, for those entrepreneurs who fancy themselves as mavericks, transparency won't really be a selly point... as the abstruse nature of a deal left room in their mind to think that they'd pulled one over on the pro.
Thankfully, mavericks are often surrounded by calmer minds... so I think the transparency will still be a plus.
My only question is this: as there's really no vibrant marketplace for firms such as yours to hawk your wares, do you think that this differentiator will really be key in the discovery phase? I suspect that it will, most likely, be a deciding factor during negotiating... when parties that were chosen for other, more visible qualities (mostly connections) must square-off for business.
Anyway... just a thought or two.
Good on Thorpe Capital for being progressive!
Posted by: Silus Grok | June 2, 2006 7:32 AM | Permalink to Comment