An M&A advisory firm is hired to run a sale, and the engagement letter signed at the start decides most of what follows: who the firm may approach, what it is paid, when it is paid, and what is owed if you sell to somebody it never introduced. The work is recognisable from any brokered sale. What differs is the size of the company, how the buyer list is built, and the fact that the fee is usually a scale with a floor under it rather than a single number.
Sell side advisory and buy side M&A advisory are two different engagements
Sell side advisory means the firm has been appointed by the company that is selling: it writes the information memorandum, assembles the buyer list, runs the approach, and manages diligence to a close, and it is paid mainly on completion. Buy side M&A advisory is the mirror image, a firm retained by an acquirer to find targets, approach them and negotiate on the acquirer's behalf. The distinction matters to an owner because the same firm will do both, and a pitch deck of past deals often mixes them. Ask which side each named transaction was run from before reading it as evidence about your own sale.
What M&A transaction advisory services actually cover
Transaction advisory is the diligence and accounting work around a deal rather than the brokering of it: quality of earnings, working capital analysis, tax structuring, and the completion arithmetic. It is usually sold by an accounting firm and bought by whichever side is doing the checking, which is most often the buyer. An owner told to expect it on their own side is normally being offered a sell side quality of earnings report, which is a separate product from the advisory mandate, priced separately, and worth separating in the letter so the two fees do not arrive as one.
Who may take a fee for selling a business, and who may not
Federal law carries an explicit registration exemption for a merger and acquisition broker at 15 U.S.C. 78o(b)(13). It is worth an owner's attention because it draws a line the pitch will not. The exemption reaches only a privately held company that, in the fiscal year before the adviser was engaged, had earnings before interest, taxes, depreciation and amortization under $25,000,000 or gross revenues under $250,000,000. It is lost if the adviser takes custody of the funds or securities being exchanged, provides the financing, assembles the group of buyers, or represents both sides without written disclosure and written consent from each. An adviser who wants the money to pass through their own account is outside it.
What you are buying, and the three numbers in the letter
The letter usually carries three numbers and one date. The retainer is paid whether or not the business sells, and whether it is credited against the success fee is a single sentence worth reading twice. The success fee is a rate on the price, often stepped, with a minimum fee underneath it that becomes the number that actually binds on a smaller sale. The tail is the period after termination in which the firm is still owed a fee if you sell to anybody it introduced. The broker contract worksheet on this site works the first two against a price you type in, including the case where the minimum is what you end up paying.
Questions people ask about m&a advisory
How do small M&A advisory firms charge?
Usually a retainer, monthly or one off, plus a success fee on completion with a minimum underneath it. The retainer tends to be smaller than a larger firm's and the minimum proportionally higher, which is the trade being made: less paid up front, more of the floor showing if the price lands low.
Are boutique M&A advisory firms a better fit for a smaller sale?
Often, for a reason that has little to do with quality. A smaller firm's economics work at a deal size a larger one declines, so the sale gets a senior person rather than being the smallest file in the room. The question to ask is who runs your process day to day, and how many other mandates that person is carrying while they do it.
What do M&A advisor fees usually look like?
A retainer, a rate on the price, and a minimum. Scales that step down as the price rises are common, and so are scales that step up, which pay the adviser more on the part of the price you care about most. Read which direction yours runs before arguing about the headline rate.
Are M&A advisory fees negotiable?
The headline rate is the least negotiable part of the letter. The minimum fee, whether the retainer is credited, and the length of the tail are the three that move most often, and on a smaller deal those three decide what you actually pay.
Do mergers and acquisitions advisory firms do the same job as a business broker?
The job is the same shape: prepare, approach, negotiate, close. The differences are deal size, how the buyer list is built, and whether the process runs as a controlled auction with a deadline or as a series of conversations. The title a firm gives itself is not a reliable guide to which of those you get.