- A senior in-house M&A hire is rarely just a salary. At the level that can run a program, candidates expect equity in the platform and transaction bonuses, and both are paid whether or not the program hits its targets.
- An outsourced team is paid in cash, tied to the program, with no equity, no deal-bonus plan and no recruiting cycle. It is senior on day one and scales with deal flow.
- In-house wins once acquisitions are a permanent, steady-state capability. Before that point, outsourcing is usually cheaper, faster and lower risk, and it can hand off to an in-house hire later.
Unless marked otherwise, this article is Louie Lee’s practitioner view from leading M&A inside six sponsor-backed platforms, four of them as the first M&A hire.
The capacity problem
A sponsor-backed platform with an add-on thesis needs a steady cadence of closings to hit its value-creation plan. Deal flow is lumpy: a quiet quarter, then three LOIs at once. A platform that staffs for the peak carries idle cost in the trough. A platform that staffs for the trough loses deals in the peak, or pushes its CFO and operators into diligence they should not be running.
The usual answer is to hire a head of M&A or corporate development. Before making that hire, it is worth pricing what it actually costs.
What a senior in-house hire really costs
The person who can run an acquisition program end to end, from thesis and sourcing through LOI, diligence, closing and integration, is a senior hire. At that level the cash salary is the visible part of the package. The rest is where the cost sits:
- Equity. Senior M&A candidates at sponsor-backed platforms generally expect a stake in the outcome, usually profit interests or options in the management pool. Every point granted to the M&A hire is a point that is not available for operators, physicians or attorneys, or for the next key hire, and it is granted up front, before the program has delivered anything.
- Transaction bonuses. Deal bonuses per closing, or tied to deployed capital, are common for senior corp dev roles. They reward volume, which is not always the same thing as reward for good deals, and they sit on top of salary and equity.
- Recruiting and ramp. A retained search, a months-long process, and then a ramp period while the new hire learns the platform, the sponsor’s expectations and the target market. The program is effectively paused for the duration.
- Fixed cost through the cycle. Salary, benefits and the equity grant continue through slow quarters, a paused thesis or a sale process, when the platform may be doing no acquisitions at all.
- Key-person risk. One person holds the pipeline, the seller relationships and the deal history. If that person leaves, often around a liquidity event, the program leaves with them.
- A team of one. A single senior hire still needs analysts to build models, manage data rooms and run diligence trackers. That is more headcount, more fixed cost and more management time.
What outsourcing changes
- No equity, no bonus plan. An outsourced team is paid in cash fees tied to the program. The cap table and the management incentive pool stay intact for the people who run the business.
- Senior from the first week. There is no search and no ramp. The team arrives with the playbook already built: target maps, pre-LOI models, diligence trackers, funds flow templates and integration plans.
- Cost that follows deal flow. Fees scale up when the pipeline is full and down when it is quiet. A retainer credited against success fees keeps the team committed without paying for idle months at full rate.
- A bench, not a person. A deal lead, managers and analysts who have worked together before, so three LOIs at once is a staffing question, not a crisis.
- Pattern recognition across platforms. A team that has run programs in several platforms has seen more seller types, structures and failure modes than a hire who has run one.
- Clean optionality. If acquisitions become a permanent core capability, the outsourced team can help recruit, onboard and hand off to an in-house hire, with the pipeline and templates intact.
Side by side
| Dimension | Senior in-house hire | Outsourced team |
|---|---|---|
| Time to productive | Search, then ramp | Weeks |
| Equity | Typically expected; granted up front from the management pool | None |
| Transaction bonuses | Common, on top of salary and equity | None; fees are the whole cost |
| Cost in a slow quarter | Unchanged | Scales down |
| Capacity in a busy quarter | One person plus whoever can be borrowed | A staffed bench |
| Key-person risk | Concentrated in one hire | Spread across a team |
| Institutional knowledge and culture | Builds inside the company | Must be documented and handed over deliberately |
The last row is the honest one. An in-house team accumulates knowledge and culture that an outside team has to work at transferring. Good outsourced programs plan for that from the start, with shared trackers, written playbooks and a defined handoff.
Three ways to engage
- Outsourced corporate development. The team runs the platform’s acquisition program day to day and reports to the CEO or the sponsor deal team.
- Co-advisory with a bank or broker. The bank keeps the client, the engagement letter and the brand. The outside team staffs the execution workstreams on that mandate.
- Workstream support. One defined deliverable, such as an operating model, quality-of-earnings coordination, a funds flow or an integration plan, for a fixed fee.
Economics
- Retainer plus success: a monthly retainer credited against success fees per closing. Best for multi-deal add-on programs.
- Success-fee share: on co-advised mandates, a share of the lead advisor’s success fee. No close, no cost.
- Workstream fee: a fixed fee for a defined deliverable. Best for a discrete capacity gap.
In each case the fees are the whole cost: no equity, no transaction bonus plan, no benefits load and no recruiting fee.
When to build in-house instead
Outsourcing is not always the answer. Build in-house when acquisitions have become a permanent, steady-state part of the business, with a predictable cadence of closings expected for years rather than quarters; when integration is so central that the deal team needs to live inside the operating culture; or when the sponsor wants M&A leadership as part of the management team it will present at exit.
Many platforms do both in sequence: outsource while the thesis is proven and the pipeline built, then hire, with the outside team handing over a working program instead of a blank page.
Hire for a permanent capability. Outsource for capacity, speed and judgment you need now, and keep the equity for the people who will run the business.
Frequently asked questions
What is outsourced corporate development?
An outside team that runs a company’s acquisition program, including sourcing, valuation, LOIs, diligence, closing and integration planning, in place of or alongside an in-house corporate development team.
Do we have to give an outsourced M&A team equity?
No. An outsourced team is paid in cash fees tied to the program, typically a retainer credited against success fees, a share of a lead advisor’s fee on co-advised mandates, or a fixed workstream fee. There are no profit interests, options or transaction bonus plans.
How fast can an outsourced team start?
Typically within weeks: there is no search or ramp period, and the team brings its own models, trackers and templates.
When does an in-house M&A team make more sense?
When acquisitions are a permanent, steady-state capability with a predictable cadence for years, when integration requires the deal team inside the operating culture, or when the sponsor wants M&A leadership in the management team at exit. Many platforms outsource first and hire later.
Louie Lee
Founder & Managing Partner, Lockstep Partners. Led M&A at six PE-backed healthcare and legal services platforms; previously Greenhill & Co., UBS and Graham Partners. Get in touch.
This article is general information, not legal, tax or investment advice. Laws change quickly; confirm current requirements with counsel in each state.