Hi,
I have read that transaction fees are deducted from mgmt fees.
If we have a 2% mgmt fee of commited capital (say it 10 million), and the GP have spent 1 million in advisory reports, they just get 9 million??
Thank you.
Where did you read that transaction costs are deducted from management fees?
I read it on the schweser notes! Is it so?
If Im the GP and Im getting 10 million out of mgmt fees and have spent 1 million on externa advisory do I get the 10 millions or 9?
Yes, it’s possible, however IMO it should not be assumed that 100% of the transaction cost will be paid by the GP. The reason why I asked is to know in case any other book stated to assume it that way.
If memory serves me right then there’s also a question at that back of PE chapter where they ask whether 50% split of transaction fees b/w GP and LP is more preferred to 100% paid by GP (something along those lines).
In short, don’t assume what % of TC will be paid by GP, just look for the details of split b/w GP and LP.
Other’s can correct me if I’m mistaken but it’s what I can recollect from memory
I was about to create a thread about transaction fees. But since this related topic has already been created i will post my doubt here. Would be great if someone could help me out- from schweser -" Transaction Fees-These are fees paid by third parties to the GP in their advisory capacity ( for investment banking services, such as arranging a merger). These fees are usually split evenly with the LPs and, when received, are deducted from management fees" i don’t get it. Does this means GPs also do investment banking activities?? Like advising M&A n all? I used to think that advising is exclusively done by investment banks to PE Funds and Portfolio Companies…
This is a very good questions I would appreciate an answer to.
Me too.