An M&A pipeline gets reported as a count because a count is easy, and a count is close to meaningless. Fourteen live mandates could be a quarter of fees or a year of unpaid work depending on what closes and at what size. Turning the count into a number takes three figures a desk either knows or can defend, and the discipline of writing the third one down honestly is where most of the value is. This page sets out the arithmetic and the two ways it usually goes wrong.
Three figures, and the third one is the honest one
How many mandates are live, what share reach close, and what an average one is worth in fees. The first is a fact, the second is a measurement most desks have never made, and the third is a calculation. On the worked example here, 14 live mandates at a 35% close rate with a $12,000,000 average enterprise value and a 5% fee gives 4.9 expected closes and $2,940,000 of expected fees.
Count the quiet ones or the rate is fiction
A process that has not moved in two months is still in the pipeline. Dropping it out flatters the close rate rather than the count, and it is the close rate that everything downstream gets multiplied by. The honest method is to fix a date two years back and follow every mandate that was live then to whatever actually happened to it.
Retainers are a different and more certain line
Retainers get billed whether or not a process closes, which makes them cash the pipeline number should not contain. Keeping them separate means the pipeline figure stays honest about risk: $112,500 of retainer over nine months on the worked example is money the firm sees regardless, and $600,000 of success fee is money it might not.
The number to keep is per mandate, not total
$210,000 is what one live mandate on the worked example is worth once the close rate is applied, and it is far more useful than the book total because it prices the next decision. Whether to take on another process, whether to hire, whether to decline a small one: all of those are arguments about a per-mandate number.
Questions people ask about m&a pipeline
What close rate is realistic?
Yours, counted over two years including the mandates that went quiet. Most desks come back lower than they guessed.
Should retainers be in the pipeline number?
No. They are billed regardless of outcome, which makes them cash rather than pipeline. Keeping them separate keeps the risk honest.
How often should the number be recalculated?
Monthly is enough. The inputs move slowly; what changes weekly is the count, which is the least informative part.