# Deal Fee

A **deal fee** is a one-time fee paid by a portfolio company to the GP at the time of investment close. It compensates the GP for deal sourcing, structuring, legal coordination, and execution work. Common names include advisory fee, arrangement fee, origination fee, and closing fee.

## Who Pays and Who Receives

Deal fees are paid by the **portfolio company** directly to the **GP entity** — not to the fund. This means the fee does not flow through LP capital accounts. However, the LPA requires the GP to apply the offset percentage of every deal fee as a credit against future management fees owed by LPs.

This arrangement means:

* The GP recovers deal execution costs from the portfolio company.
* LPs benefit through reduced management fees, not through a direct cash payment.

## Typical Amounts

Deal fees typically range from 0.5% to 1.5% of the invested capital for each deal, and are negotiated deal-by-deal. For large buyouts, the absolute amounts can be significant (€1M–€5M+).

## Management Fee Offset

The LPA states what percentage of deal fees must offset the management fee. For example, with a 100% offset:

```
Deal fee received: €500,000
Offset percentage: 100%
Management fee credit: €500,000

Next quarterly fee call for the fund: €200,000
After applying credit: €0 called; €300,000 credit carries forward
```

See [Fee Offset](/fees/fee-offset.md) for how credits accumulate and carry forward.

## Relationship to Transaction Fees

[Transaction fees](/fees/transaction-fee.md) are similar but arise from *portfolio company* M\&A or refinancing events after the initial investment. Deal fees are earned at the time of the initial investment. Both are subject to the management-fee offset provision and recorded in Gildi's fee-offset ledger.

## How Gildi Records Deal Fees

When a GP records a deal fee in Gildi, the system:

1. Logs the fee amount, portfolio company, and receipt date in the fee-offset ledger.
2. Applies the configured offset percentage to determine the credit amount.
3. Adds the credit to the running offset balance for the next fee call.
4. Surfaces the new credit balance on the GP fee management dashboard.

For the full offset calculation methodology, see the [fees methodology](/methodology/_fees.md).


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