M&A Advisor Fees in Europe: What Sellers Actually Pay

A sell-side M&A advisor in Europe is usually paid in two parts: a monthly work fee while the sale is being prepared and marketed, and a success fee when the deal closes. In the European M&A Fee Guide 2023-24 by Firmex, based on 199 advisors from 22 countries, the average success fee is 4.7% for a €5 million deal, 3.5% for €20 million, 2.0% for €100 million and 1.7% for €150 million. In that survey, the most common monthly work fee was €5,000 to €10,000. The headline percentage, however, is only part of the cost: minimum fees, the definition of transaction value and the treatment of deferred payments often matter as much.

Why the fee structure matters

For most owners, selling the company is the largest financial transaction of their life, and the advisor's fee is one of the biggest costs attached to it. On a €20 million sale, a difference of one percentage point in the success fee is €200,000. A clause that charges the full fee at closing on an earn-out the seller may never receive can cost more than that.

Fee structures also shape behaviour. An advisor paid mostly through monthly retainers has less pressure to close; an advisor paid only on success may push for a quick deal at a lower price, or decline to take on a company that needs a long preparation. Understanding how the components work helps you negotiate terms that align the advisor's interest with yours: the highest achievable price on terms you can accept.

The four components of an M&A fee

European mandates are built from the same blocks, combined in different proportions:

In the Firmex survey, 90% of European advisors charge some form of engagement fee in addition to the success fee. Only one in ten works purely on success.

Work fees and retainers

The way advisors charge for their time has shifted. One-off upfront retainers are giving way to monthly fees and to payments tied to milestones, such as approval of the information memorandum or signing of a letter of intent. In 2023, 15% of European advisors already used milestone-based fees, a structure that did not appear often enough to be measured a year earlier.

How much. In the Firmex survey of 2023, the most common monthly work fee in Europe was €5,000 to €10,000. About a third of firms (32%) charged €11,000 a month or more. Smaller advisory firms charged less: 77% of them stayed at or below €10,000 a month, compared with 44% of larger firms. Where a lump-sum retainer was used, it was most often €10,000 or less for smaller mandates. Fees have tended to rise since then, so treat these figures as a reference point rather than a current price list.

Why advisors insist on them. Advisors describe work fees as a test of the owner's commitment and as protection against processes that drag on or end without a deal. Deals have become slower and more likely to fail late, so firms have shifted part of their income from success fees to fees they receive regardless of the outcome. Some firms in South-East Europe and Turkey have raised minimum retainers and added a second payment after the first letter of intent for the same reason.

Is it deducted from the success fee? Advisors are split almost evenly. In 2023, 51% credited work fees against the success fee, up from 42% a year earlier. Some firms credit only part of the retainer, or credit it only if the deal signs within a set period, for example 100% within 12 months and 50% between 12 and 18 months.

Success fee by deal size

The success fee is where most of the advisor's income comes from, and the percentage falls as the transaction grows. These are the average rates European advisors reported in the Firmex survey:

Source: Firmex, European M&A Fee Guide 2023-24. Euro amounts are calculated from the average rates.

The averages hide a wide spread. For a €20 million deal, three fifths of advisors quoted between 2% and 4%, one fifth less than 2% and one fifth more than 4%. Advisors working on the smallest deals argue that companies below €20 million need fees above 5% plus a retainer, because the work is similar and the chance of closing is lower.

What drives the percentage. Asked what matters most when proposing a success fee, 60% of European advisors named the risk that the deal will not close, followed by the size of the engagement and its complexity. A company with clean accounts, a clear buyer universe and realistic price expectations is cheaper to sell, and that can be reflected in the fee.

Lehman, flat and accelerator structures

The percentage can be applied in three ways.

Lehman formula. The rate falls as the price rises. In its classic version, the advisor receives 5% of the first million, 4% of the second, 3% of the third, 2% of the fourth and 1% above that. Many advisors use a "double Lehman" that starts at 10% and falls to 2%, or their own scale with larger tiers. In 2023, 49% of European advisors used a Lehman-type structure, making it the most common approach.

Flat percentage. One rate on the whole price. About 30% of European advisors use it. It is simple to understand, and some owners prefer it for that reason.

Accelerator. The rate increases above an agreed price, rewarding the advisor for beating a target. It was used by 19% of advisors. An accelerator is useful when the owner and the advisor disagree about what the company is worth: the owner pays more only if the higher price is actually achieved.

Illustrative calculations. Real scales are negotiated case by case.

The classic Lehman scale was designed decades ago and produces very low fees on mid-market deals today. In practice, advisors combine a modified scale with a minimum fee.

Minimum fees, break fees and expenses

Minimum success fee. In 2023, 76% of European advisors charged one, and many reported raising their minimums because valuations had fallen and owners' forecasts were often too optimistic. For a company worth a few million euros, the minimum, not the percentage, usually decides what the sale costs.

Break fee. Some advisors charge a fee if the owner rejects a genuine offer that meets the agreed terms. In 2023, 35% of European advisors did so, slightly fewer than a year earlier. If the engagement letter contains such a clause, make sure "genuine offer" is defined precisely: price, structure, conditions and the buyer's proof of funding.

Expenses. Four out of five European advisors are reimbursed for travel and accommodation, and two thirds pass on the cost of a virtual data room. It is reasonable to ask for a cap on expenses or a requirement for prior approval above a set amount.

Earn-outs, deferred payments and when the fee is due

More deals now include part of the price paid later: earn-outs that depend on future results, vendor loans, or payments held in escrow. This raises a simple but expensive question: is the success fee calculated on the full price, including amounts the seller may never receive, and is it paid at closing or when the money actually arrives?

In the Firmex survey, about half of advisors insist on receiving the full fee at closing, regardless of when the seller is paid, down from 56% a year earlier. The other half accept payment as the components of the price are received. For the seller, the second option is clearly better, and it is a reasonable request whenever a significant share of the price is deferred or contingent.

A worked example

A company is sold for €20 million: €16 million paid at closing and up to €4 million as an earn-out over two years. The process takes nine months. Compare two engagement letters with the same headline rate of 3.5%:

The headline percentage is identical, yet Letter A costs the seller €137,500 more, and part of it is paid on money the seller did not receive.

What the fee should buy

Comparing advisors only by percentage misses the point. The fee is worth paying if the advisor changes the outcome: a higher price, better terms, or a deal that would not have happened at all. When you compare proposals, look at what each advisor will actually do.

• Preparation. Normalising earnings, building a forecast buyers believe and fixing documentation gaps before buyers find them. This is where a large part of the value is protected.
• Buyer reach. A concrete list of strategic buyers and funds, including those in other countries, rather than a promise to "use our network".
• Competition. A process that brings several buyers to the table at the same time. A single bidder sets the price; several bidders compete on it.
• Negotiation of terms. Price adjustments, deferred payments, warranties and escrow often move more money than the headline price difference between two offers.
• Time. The advisor runs the process while the owner keeps running the company. Results that slip during a sale reduce the price.

A proposal that is cheaper by half a percentage point but comes from a firm with no buyers in your sector, or with a single junior person assigned to your sale, is rarely the better deal.

Brokers, advisors and investment banks

Fee levels also depend on who you hire. Business brokers, who sell small owner-run businesses through listings, usually charge a higher percentage and rarely charge retainers; around 10% is common in some markets, but rates vary widely by country and deal size. M&A advisors working in the mid-market charge the work fee plus declining success fee described above. Investment banks advising on large transactions charge lower percentages on much larger amounts, often with substantial monthly retainers. Our separate guide explains how to tell which type of advisor your company needs.

Checklist: what to agree before you sign

• Transaction value. Is the percentage applied to enterprise value or equity value? Is assumed debt included? What about real estate or assets excluded from the sale?
• Deferred and contingent payments. Is the fee on an earn-out or vendor loan paid at closing or as received?
• Credit for work fees. Are monthly fees deducted from the success fee, fully or partly?
• Minimum fee. How much, and does it apply to a partial sale or a minority investment?
• Break fee. Is there one, and how is a qualifying offer defined?
• Expenses. Which costs are reimbursed, and is there a cap?
• Exclusivity and term. How long does the mandate run, and how can either side end it?
• Tail period. For how long after the mandate ends is a fee due if you sell to a buyer the advisor introduced? Twelve months is common; insist on a written list of introduced buyers.
• Scope. Does the fee cover only a full sale, or also a minority stake, a refinancing or a sale of assets?

Questions and answers

Sources

• Firmex, European M&A Fee Guide 2023-24
• Firmex, M&A Fee Guide 2024-2025, European edition
• Axial, M&A Fee Guide 2024-2025