A Window Into The Private World Of M&A Fees

What’s a fair price for advice on acquisitions of small and medium-sized companies (SMBs)?

It’s hard to get a data-driven read on many aspects of the sprawling lower middle market, especially on a topic as sensitive as M&A advisory fees. Enter Axial and Firmex, which have published the first post-Covid study of private M&A fees.

Axial and Firmex pooled their collective M&A advisory customer bases and executed an anonymous 32 question survey that dives into the secretive world of M&A advisory pricing, exploring retainer pricing, fee structure, fee minimums, reimbursables, and more.

The survey confirms that the current market for lower middle-market M&A transactions is extremely strong. Fee levels have held steady and, in some cases, may be increasing. Only 8% of the surveyed M&A advisors indicated that they needed to reduce fees because of the pandemic.

A few additional data highlights:

• The most common success fee on deals below $10 million is between 4% and 6%
• Success fees for deals of $100 million and up are most commonly between 1% and 2%
• Advisors generally insist on collecting their full fee at closing, even if some of the seller’s consideration is subject to escrows, earnouts, or other holdbacks

The full report offers insights into many other provisions found in typical middle-market engagement letters.