What is a good rule of thumb for an acquisition fee as a percentage of the purchase price?

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Multiple Choice

What is a good rule of thumb for an acquisition fee as a percentage of the purchase price?

Explanation:
A common rule of thumb for an acquisition fee is about 1% of the purchase price. This level typically compensates the sponsor for the time, diligence, and effort involved in sourcing, evaluating, and closing the deal, while still keeping the fee from materially eroding investor returns. A smaller fee like 0.5% can understate the work required, and a 2% or higher fee would be considered high and could raise concerns about alignment of interests and return impact. So 1% strikes a practical balance widely observed in practice.

A common rule of thumb for an acquisition fee is about 1% of the purchase price. This level typically compensates the sponsor for the time, diligence, and effort involved in sourcing, evaluating, and closing the deal, while still keeping the fee from materially eroding investor returns. A smaller fee like 0.5% can understate the work required, and a 2% or higher fee would be considered high and could raise concerns about alignment of interests and return impact. So 1% strikes a practical balance widely observed in practice.

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