Boutique M&A advisory firms are chosen on relationship and judged on outcome, and the thing that connects the two is capacity, which nobody asks about. A boutique earns in lumps on a minority of the engagements it starts, funds the work in between with retainers that rarely cover it, and is constrained by senior attention rather than by demand. Understanding that shape tells you what to ask before appointing one.
The economics are lumpy and back-loaded
On this site's worked example a mandate bills $12,500 a month for nine months and then $600,000 at close: $712,500 in total, most of it at the end and only on the ones that close. At a 35% close rate, two thirds of everything started earns no success fee, which is the cost structure rather than a failure rate.
Capacity, not demand, is the constraint
A boutique can nearly always find another pitch. What it cannot do is run more live processes than it has senior attention for, and thinly attended processes close at a lower rate, which makes over-taking self-punishing. That is why how many live mandates they carry is the most informative question you can ask.
What that means for your process
You want to be a mandate the firm needs to close, not its ninth. On a $12,000,000 sale your fee is $600,000, which is a serious number at a boutique and a rounding error elsewhere. Attention follows economics, and asking where your fee sits in their year is a fair question.
What to ask, specifically
How many live mandates now, who runs mine day to day, how many of my size that person closed last year, and whether retainers are credited against the success fee. On the worked example crediting moves the number at close from $600,000 to $487,500, which is worth establishing before the engagement letter.
Questions people ask about boutique m&a advisory firms
What is the most useful question to ask a boutique?
How many live mandates they are carrying. Capacity rather than demand is the constraint, and thinly attended processes close less often.
Why is the fee so large in percentage terms?
Because at a 35% close rate two thirds of the work started earns no success fee. The fee on the ones that close carries the rest.
Should retainers be credited?
It is the negotiation. On the worked example it moves the number at close from $600,000 to $487,500.