- get your finances in order;
- pinpoint potential suitors and attract bids;
- serve as a go-between and a proctor who keeps sale negotiations moving along;
- identify practical deal terms to help maximize the sale value and ease the ownership transition; and
- plenty more.
- $225,000 on a $5 million deal;
- $665,000 on a $20 million deal; and
- $1.3 million on a $50 million deal.
- 39.34% reported working on one to five deals annually
- 29.9% reported working on six to 10 deals each year; and
- 17.5% of respondents reported their firms completed over 16 deals a year.
The Lehman Formula
Let's assume you successfully sell your business, with a healthy assist from an M&A advisor. Here, many advisors charge a so-called success fee that fits into one of three categories:- Simple percentage, 37.4%
- Scaled percentage, 37%
- Lehman formula, 25.6 percent.
"descending scale and can be structured where the first$5 million of a deal’s value may be charged a certain percentage, say 6%, Then, the next five million another percentage, say 3%, and the remaining amount can be charged another percentage, perhaps 2% for example," the survey writers say.
"a valuation target is set and a base-level success fee for this valuation is determined, with increments above this target valuation earning successively higher fees. To illustrate, a $10 million dollar target valuation could earn a 2% fee, the next $10 million may earn 3%, and the next $10 million may earn 3.5%."
Additional Variables
Many brokers use a mixed approach. For instance:- Perhaps there's a monthly retainer fee, typically designed for a fixed length of time (perhaps six months). Say, $50,000.
- Then, there's a commission based on the company sale value. Say, 6%.
- The $50,000 retainer.
- And now you owe the 6 percent commission on the $5 million -- which computes to $300,000.
- The twist: The actual commission payment can be $250,000 because many brokers will credit you the original retainer fee.