What’s a fair price to pay for the insight of an M&A firm or investment banking advisory when buying or selling small and medium-sized companies? Because these transactions are rarely public, it’s difficult to know what industry standard is—or even whether such a standard exists. But a new Firmex and Axial report sheds light on M&A fee structure, common practices, and industry expectations. If you’re looking for an M&A firm to sell your Dallas business, this data can help you make more scientific decisions and establish reasonable expectations.

Axial and Firmex polled their customer bases with a 32 question survey that asked pointed questions about M&A practices, including fee structure, minimum fees, expense reimbursement, retainer pricing, and more. The survey confirmed a strong M&A market in the lower and middle markets. Fees are generally steady, but may be increasing in some sectors. Just eight percent of advisory firms reported needing to reduce their fees or shift their fee structures downward because of the COVID-19 pandemic.

So what did the survey find? A few highlights include:

  • Success fees on deals below $10 million averaged between 4% and 6% of deal value.
  • Success fees for deals in excess of $100 million are typically lower, at 1% to 2% of total deal value.
  • Advisors typically expect to collect their full fee at closing, even when there are delays in sellers’ access to cash.
  • Dealmakers typically must also pay expenses, though how advisory firms handle expenses varies from firm to firm.
  • In some cases, investment firms also charge an upfront fee, but this never comprises the majority of fees.

While some deals may fall outside of these norms, there should always be justification for this. When there is not, it’s important to ask the advisory team pointed questions about the discrepancy.