M&A advisor fees are quoted as a percentage and paid as four separate things, and a seller who negotiates only the percentage will be surprised twice. The four are the retainer, the success fee, whether the retainer is credited against it, and the minimum. This page works all four on the transaction this site uses throughout, so the numbers are concrete rather than a range.
The retainer: paid whether or not it closes
A monthly amount that funds the work. On the worked example, $12,500 a month over a nine-month process is $112,500. It is the adviser's protection against the two thirds of mandates that do not close, and a firm that waives it entirely is either very confident or taking a position you should ask about.
The success fee: the part that is negotiated
A percentage of consideration at close. At 5% on $12,000,000 that is $600,000. Double Lehman tiers on the same deal come to $440,000, or just under 3.7%, which is why mid-market advisers typically negotiate a flat rate above the scale rather than the scale itself.
Crediting: the clause worth more than a percentage point
Whether retainers already paid come off the success fee. On the worked example, credited moves the payment at close from $600,000 to $487,500 while the total earned stays $712,500 either way. Sellers concentrate on the percentage and this clause is frequently worth more.
The minimum, which matters on smaller deals
A floor below which the percentage does not apply. It is invisible on a deal of this size and decisive on a smaller one: on a $3,000,000 sale a $400,000 minimum is over 13%, which is a different business arrangement from the one the headline percentage describes.
Questions people ask about m&a advisor fees
What do M&A advisor fees total?
On the worked example, $112,500 of retainers plus $600,000 at close is $712,500, or $487,500 at close if retainers are credited.
Is a retainer normal?
Yes. It funds work on the two thirds of mandates that do not close. A firm waiving it entirely is worth asking about.
What should a seller negotiate hardest?
Crediting and the minimum. Both frequently move more money than a percentage point on the headline rate.