M&A Fees Explainedma fees bill M&A Advisor Fees   iMerge Advisors

 

M&A advisors do not readily advertise mergers and acquisitions m&a fees on their websites.  In fact you would be hard pressed to find any that would pigeonhole a M&A advisor fee percentage to a specific deal size.  It is common knowledge the larger the deal size the smaller the M&A fee.  So why are those M&A fee’s so high in the first place ask many of our clients?

There are many internal and external factors to M&A firms and mergers acquisitions advisors that impact fees.  One factor that impacts all firms is to recognize not every deal closes.  Reasons are many but a common one is typically when a seller or its shareholders decide not to sell.  Even with the collection of an upfront retainer or work fee ($50k -$250k) these failure to close transactions cause significant losses both in financial and opportunity costs. The top M&A firms do not accept every client that engages them.  To do so would result in providing a poor service due to lack of bandwidth.  So when a transaction does not close the M&A advisory firm has to factor into its success fee the cost of the deals that were turned down.

Additional external factors impacting m&a fees are regulatory and administrative.  Large m&a firms with multiple metropolitan locations worldwide have significant administrative expenses to recover.  In addition, deals involving complex securities require these firms to be registered as broker dealers with the SEC/FINRA adding significant compliance expenses to manage.  It is for this reason these large firms will prefer deal sizes in excess of $100 million in which they can earn several million in fees.  At a minimum these larger firms would expect to earn $2 million in fees.

For mid size firms who operate in the $25 to $75 million range the fees would have to range in the $750k to $2 million range.  The small boutique firms operating in the under $25 million range will seek fees from $200k up to $1 million.

M&A Fees You can Expect to See

In addition to the the retainer or work fee from $50k to $250k, which is sometimes paid as a monthly consulting fee over a period of 4-12 months, you will incur a success fee:

  • Deal Size $1 million to $5 million expect to be quoted a success fee of 12% to 8%
  • Deal Size $5 million to $25 million expect to be quoted a success fee of 7% to 4%
  • Deal Size of $30 million to $100 million expect to be quoted a success fee 4% to 2%

M&A Fees may vary depending on the deal size but for those deals whether its $10 million or $75 million (stay tuned for an article on why smaller deals take  up much more of an M&A advisors time)  to the experienced m&a advisor its only a number in which everything else remains the same in getting your business successfully sold for the highest valuation possible.

 

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3 Responses to M&A Advisor Fees – iMerge Advisors

  1. Luke says:

    Michael,

    Great article — gets right to the heart of things. I was wondering if you could direct me to where you gathered the retainer fees information from (that they range from 50k to 250k). It would be a huge help.

    Thanks and keep up the good work!

  2. franca says:

    Who pays for the M&A advisor fee, the buyer or the seller.
    Thanks

  3. Franca – Either side can pay the fee. Most often the M&A advisor represents the seller and upon a successful transaction the seller would pay the fee at the closing. However, strategic and financial buyers can engage advisors to locate potential add on sellers for their existing business. In this case, upon closing the buyer pays the advisor a fee. It is very unscrupulous if any advisor attempts to collect a fee from both the buyer and seller for the same transaction.

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