How much does an M&A advisor cost?
Mergers and acquisitions are quite complex. Often there are no specialists in these processes within companies and it is necessary to engage outside experts. Most of them choose the largest M&A firms where the level of specialists is not weaker than Valley Biggs representatives. But even they cannot always guarantee a successful merger.
For companies facing this process for the first time, it is important to understand the average M&A advisor costs. This will help you plan your finances and hire a good advisor for the process. However, many factors can affect this amount. Let's try M&A advisor fees explained in more detail so that clients can understand the specifics of the financial relationship with them.
Types of fees for M&A advisor
Intermediaries charge a fee for the advice they provide. When examining M&A advisor fees for small businesses companies identify 4 main fees:
- standard fee;
- success fee;
- fixed success fee;
- a fixed percentage for a successful deal.
All these charges vary from company to company. There are various factors influencing M&A advisor fees, but before entering into a contract, company specialists should tell you which fees they will charge and in what amounts. Each of these fees has its peculiarities. Let us analyze them in detail.
Standard commission
When considering how to negotiate M&A advisor fees companies need to realize that they cannot do without the standard commission. This payment differs from the others in that it is paid as an advance payment for advice. Thanks to it, intermediaries cover their initial expenses.
Most often such a payment is prescribed either fixed or a percentage of the transaction. But it is negotiated at once and if you compare M&A advisor retainer vs. success fee, the standard fee will be slightly higher. But this fee allows you to get a reliable and dedicated advisor before all negotiations start.
Success fee
Some people mistakenly refer to this payment as the so-called hidden costs of hiring an M&A advisor. But it is one of the most transparent payments because clients can pay it as a result of a successful deal. This payment can be either a sum or a percentage of the deal.
With such a fee, the intermediary will be interested in a positive outcome for you and he will be working towards a common goal with you. It is crucial to negotiate the value of the success fee in advance so that when you achieve a result, it will not be news to you.
Fixed Success Fee
This is where a fixed M&A advisor cost vs. value is determined. Companies offer this option so that the client can understand in advance the amount of their costs in case of a successful merger. It is not very favorable for small companies, but large companies prefer a fixed fee.
At the same time, it is necessary to study the work of the intermediary, so that in case of a fixed fee for success, the intermediary is fully committed to the work. With Valley Biggs specialists such problems will not arise, but with other companies, it is quite possible. So decide in advance if this success fee option is beneficial to you.
Fixed success fee
In this case, it will be more difficult for you as a client to predict your costs. Most intermediaries specify exactly the percentages for a successful transaction. This allows them to work more actively and try to do everything to make the value of the transaction as high as possible. In this case, they will earn more.
When talking to intermediaries it is important to stipulate this percentage at the first contact and immediately determine the minimum and maximum threshold for payments. In this case, it is possible to better predict your costs.
Other commissions
Of course, these are not all the commissions that may have to be paid. For very large transactions, intermediaries need to hire additional specialists. These costs may not be included in the initial budget. You also need to hire lawyers, and accountants, and pay fees for trademarks and intellectual property. But these amounts will be somewhat lower than the cost of an intermediary.
Where to find a reliable intermediary
Answering the question is hiring an M&A advisor worth it? We would immediately say that yes. Such companies specialize in conducting such takeover deals. It is not profitable for you to keep a whole department of specialists, because their services are not even needed every year. But if you hire such an intermediary, make sure they are qualified and check the transparency of all fees.