Cost of a process
What an M&A adviser costs
A transaction adviser is normally paid in two parts: a monthly fee for the time spent during the process, and a success fee on transaction value, payable only once the deal closes. On top sit costs the adviser does not control: lawyers, tax advice, the data room.
You will not find percentage ranges on this page, because honest ranges do not exist. A fee on a PLN 12 million deal and on a PLN 45 million deal are two different conversations. You get a specific proposal after a first meeting, once we know what company we are talking about.
What the fee is made of
Monthly fee (retainer)
- Covers work during the process
- Paid for the length of the mandate
- Usually credited against the success fee
- Gives the adviser independence in talks
Success fee
- A percentage of transaction value
- Paid at closing, not at signing
- Ties the adviser’s interest to the price
- The main part of the compensation
Third-party costs
- Legal work on the transaction
- Tax advice on the structure
- Data room and translation
- Sometimes an independent valuation
How the success fee is calculated
The larger the transaction, the lower the percentage. That is not a negotiating trick but a consequence of the work involved: selling a company for 12 million and for 45 million takes a similar effort. A flat percentage would pay the adviser on larger deals for work nobody did.
Declining scale
Successive bands of transaction value attract a lower percentage. The best known version is the Lehman formula, in use in various forms for decades.
Simple to calculate and predictable for both sides. It does not, however, reward the adviser for negotiating more than the owner expected.
Base rate plus bonus
A base rate, and above an agreed threshold a higher percentage. Effectively a bonus for whatever the adviser pulls in beyond expectations.
Fairer to both sides and more common in smaller deals. It has one condition: the threshold has to be set honestly at the start rather than pushed down so the bonus looks impressive later.
The fee model is agreed before the process starts. After that there is no good moment to reopen it.
The retainer, and what it buys
The monthly fee raises the most questions, because it looks like a cost ahead of any result. The logic is straightforward. A process runs for a year or more and the adviser works from day one: the valuation, the memorandum, the buyer list, dozens of conversations, the data room. A purely contingent model would mean funding a year of work out of pocket.
There is one more thing worth knowing. An adviser paid only on success has a strong interest in the deal closing on any terms at all. A retainer takes some of that pressure off and makes it possible to tell a client that the right move now is to walk away.
In practice the retainer is credited against the success fee, so on a completed deal it does not raise the total. It spreads it.
What else a process costs
- Legal work. The share purchase agreement, warranties, negotiation with the buyer’s lawyers. Billed hourly and normally the second largest item.
- Tax advice. The choice between a share sale and an asset sale. A one-off cost that often repays itself many times over.
- Data room. A platform for sharing documents, billed monthly for the length of the review.
- Translation. With a foreign buyer, the memorandum and part of the documentation have to be translated.
- Vendor due diligence. A review commissioned by the seller before the process. It costs money, shortens the buyer’s review and narrows the room for price chipping.
- W&I insurance. A policy covering warranty risk, increasingly common in smaller deals too.
What moves the rate
Size is the main factor but not the only one. Complexity counts: companies in the group, property, several shareholders, operations in more than one country. So does the state of preparation, because an adviser walking into disorganised documentation faces months of work before a process can start.
And one more thing: whether a buyer is already known. A transaction with one buyer the owner has named is different work from building competition between a dozen parties. It should cost differently.
Plainly
When an adviser does not pay off
We say so before anyone signs anything.
Turning work down is not a gesture. A process with no chance of succeeding costs the owner a year of stress and the adviser their reputation. There are three situations where we say “not now” or “not with us” straight away.
Very small transactions
The cost of running a proper process eats too much of the price. A good lawyer and one conversation about structure serve the owner better.
Sole trader businesses
There is usually nothing to sell in the legal sense. The conversation should then be about something other than selling the company.
A buyer known for years
Price agreed, both sides want a simple deal. A lawyer and a tax adviser are enough, and a transaction adviser adds nothing.
How Brzyski & Partners charges
A monthly fee plus a success fee on transaction value, with the retainer credited against the fee. The specifics are agreed individually after a first conversation, because only then is it clear what company and what scope of work we are discussing. The wider principles are on the how we work page.
Frequently asked
About adviser fees.
Can it be success fee only?
Such arrangements exist, most often on larger transactions with a very well prepared company. Just remember that an adviser without a retainer has an interest in closing on any terms rather than negotiating the best ones.
When is the success fee paid?
At closing, meaning after the money moves, not at signing. Months can pass between the two, and deals do fall apart in between.
What about the part of the price paid as an earn-out?
That belongs in the mandate agreement. The fairest arrangement is a fee on amounts actually paid, at the time they are paid. A fee calculated upfront on the maximum possible price loads the seller with risk they do not control.
Is the mandate exclusive?
Usually yes, for the length of the process. Two advisers selling the same company in parallel is the fastest way to damage its reputation among buyers.
See also
- How to sell a company, a guide to the whole process
- How we work and how we charge
- Calculator showing how much of the price reaches your account
- Term sheet and escrow in the glossary