What fees can business owners expect from M&A advisory firms?

Getting a data-driven read on many aspects of the elusive lower middle market is hard, especially on a topic as sensitive as M&A advisory fees.

Nearly every M&A advisor structures their fees as some combination of a retainer and success fee. The split between retainer and success fee and how both are structured significantly impact an M&A advisor’s incentives. Understanding each can help you decide how to negotiate fees as you work with advisors.

Earlier this year, Axial partnered with Firmex and Divestopedia on the Annual M&A Fee Guide, the authoritative source on M&A fees for sell-side engagements in the middle market. They gathered data from more than 250 M&A advisory members. 

The most common answers:

Retainer Fees

• Retainer Fees: 44% are fixed, one-time fees; 31% are monthly 
• Most Common Monthly Retainer Size: 49% of advisors said $5K – $10K monthly.
• Retainer Fees Deductions from Success Fees: in 2022, 56% of advisors said they deduct their retainer fees from the success fee.

Success Fees

The Most Common Success Fee Structure:

Understanding Banking Fees

M&A advisors, like everyone else, are driven by incentives.

In turn, fees in an exit process aim to align incentives between the business owner and the M&A advisor. Ensuring that an advisor will push for the right outcome for your company comes down to getting the fee and engagement structure right.

If the fee arrangement isn’t well-structured, advisors can become conflicted. A lackluster fee arrangement can incentivize an advisor to sell the company for less money more quickly. That way, they can move on to the next deal and their next fee. 

As a business owner, you must decide whether you want a deal closed faster or for more money. The choice can significantly impact which banker to use and how to structure the fees. 

Ensuring the incentives are aligned with your expectations will help drive the deal to the correct result.

Survey Results

Below is a 2021 vs. 2022 comparison of advisors’ fee structures across retainers and success fees. Once again, these are the survey results from 250 Axial M&A Advisory firms.

I work for success fees that align with the first chart above. I do not charge retainers or work fees either upfront or monthly so, there is no deduction from the success fee paid at closing. I ask that the client pay certain expenses including the cost of a virtual data room and travel costs when necessary.

ABOUT US

Whether you want to sell or buy a business, Chapman Associates provides a personalized service based on our sixty-nine years of successful M&A closings and our relationships with more than 9,600 registered buyers.

Chapman is one of the most respected middle-market M&A firms in the country. What makes Chapman different from the competition?



• We make a market for our clients.

• We do not charge any up-front fees.

• Our fees are based on completed transactions.

• We devote senior-level attention to every M&A transaction.

• We do not delegate work to junior staff.

• We help clients set realistic goals and work hard to exceed them.

• We conduct in-depth research and rigorous analysis.

• We prepare all necessary offering materials.

• We have ten offices nationwide to serve our clients.

Mark Mroczkowski, CPA, CM&AA

Managing Director 

mark@chapman-usa.com

www.chapman-usa.com

407.580.5317