M&A Advisor Work Fees.HBC

Christopher Hess-Wegrzecki h.Lubicz

M&A and Capital Investment Services BH:+48 507-26-19-18 AH:+48 790-644-717 F: +48 587-627-884 Skype:hess-chris www.HessBusinessConsulting.info

M&A Advisor Work Fees, Retainers or Engagement Fees of Hess Business Consulting.

The selling company commits to a work fee at the beginning of the engagement. Some firms will invoice monthly over the first four to twelve months. This initial fee can also be called a retainer, engagement fee or upfront fee. This covers the M&A advisor’s direct costs during the initial stages, as well as their contribution to the preparation of the selling documents and due diligence materials.For larger transactions, the work fees are usually $100,000 or more. For boutique firms working on a $20 to 30 million transaction, the work fees are usually in the $50,000 to $75,000 range. At the lower end of the transaction spectrum the work fees don’t usually go below $50,000 because no matter how small the transaction, there is still a fixed amount of early work that has to be done.There are firms that will charge lower work fees, sometimes in the $30k to $40k range. Lower work fees are often an indication that the firm has people who are not completely busy. For that reason, lower work fees are also more common when the M&A market is not very active.



Interestingly, firms that work on transactions valued under $5 million – usually called “business brokers” often do not charge a work fee.It’s very unusual for an M&A advisor to undertake an exit transaction without a work fee. Part of the reason is that anyone involved with exits has seen a situation where, at the time of the initial engagement, the shareholders and board are enthusiastic about an exit; but by the time an offer gets to the table the shareholders have reconsidered. This can happen precisely because the M&A advisor has done a good job, and has shown the current shareholders that the company is worth more than they thought. This alone can result in shareholders changing their minds and deciding to continue to own the company for a while longer.The work fee is a fair way for the professionals to protect their initial investment in helping to facilitate a transaction. It is also a test of how serious the sellers are to actually sell the company.M&A Advisor Success Fees

Success fees for selling a business in the $10 to 30-million range are typically 6 to 8% of the final value. This means that the M&A firm that successfully completes a $25-million exit transaction will usually be paid a fee at closing of about $1.5 to 2.0 million.



For transactions over $100 million, success fees had been in the 2 to 4% range. This means that a firm executing a $100 million exit will typically receive a success fee in the $2 to 4 million range. For a $500 million exit, fees in the 2000’s were 1% – 2% range, By 2016 fees for transactions as large as $500 million had increased to 3 to 4% (see Update 2016 above).Where success fees become more challenging is in the smaller size transactions because the amount of work required to sell a $5-million business is not significantly less than the effort required for a $25-million exit.Please keep in mind that these success fees are for a fully marketed transaction. If the company being sold already knows who the buyer will be, or has it narrowed down to a few prospects, then the success fee should be one half to two thirds of the amounts above.The success fees above are also typical of gold quality services. Bronze quality success fees are about half and silver are between gold and bronze. More on the different service levels is available in this post.For a typical transaction in the $20 to 30 million range, the success fees vs M&A service quality and engagement scope looks something like this:



http://www.exits.com/blog/wp-content/uploads/Gold_Silver_Bronze_Fees-e1464557038664.jpg

Documents

M&A Advisor Work Fees.HBC