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A recent survey of 320 North American financial professionals in the lower mid-market revealed current practices for structuring M&A advisory fees.
- Firmex, a virtual deal room, and secure online document services provider.
- Divestopedia, an online M&A industry resource for entrepreneurs.
- Strategic Exits Corporation, a business consulting firm for business sales.
Top findings from the M&A advisory fee structure survey reveal:
- Over half, 56.4%, of advisories will work on deals of $5 Million or greater.
- The majority of firms, 46.4%, use a fixed fee to determine their engagement fee, to which, 61.2%, earned over $30,000 per transaction.
- Another, 37.9%, of advisory firms used a monthly engagement fee, earning between $5,000 and $10,000 a month.
Companies seeking to contract advisory services could benefit by understanding M&A advisory fee structures. Engagement or retainer fees as well as Success fees, when structured correctly could help companies save money.
The report implies retainers and success fees for smaller transaction deals incur higher fee percentages relative to large transactions. Options such as monthly engagement fees can allow clients to save money, but it can also penalize those who are uncertain. For sellers that are not prepared, or for extended deal cycles, the cost can add up quickly.
The M&A Fee Guide provides valuable fee information not widely published for both M&A Advisors as well as companies seeking to contract advisory services.
Other highlights and findings of the report include:
- Average advisory fee earnings on a $50 Million deal were $1.3 Million.
- Average advisory fee earnings on a $20 Million deal were $665 Thousand.
- Average advisory fee earnings on a $5 Million deal were $225 Thousand.