Understand the cost of M&A consultancy

When planning a merger, sale, or acquisition of companies, it’s essential to consider investing in specialized consultancy. This article explores the various cost structures of these services, helping you adequately plan when seeking M&A advisory.

How are costs structured in M&A consultancies?

The costs of M&A consulting can vary significantly, reflecting the transaction’s complexity and the required expertise level. Here are the most common forms of compensation:

• Flat Fee: some consultancies charge a fixed amount for services with a well-defined scope, such as assessments or preliminary analyses, providing budget predictability for the client.
• Success-based commission: many consultancies prefer tying their compensation to the transaction’s success, incentivizing them to achieve the best possible outcome since their remuneration directly depends on the operation’s success.
• Percentage of transaction value: often used in larger transactions, this model links the consultancy fee to the total transaction value. Fees typically vary based on complexity and transaction size.
• Payment by phases: some consultancies choose to charge based on work progress, dividing the project into phases like preparation, due diligence, negotiation, and closing. Each completed stage corresponds to a payment.

Factors influencing the price of M&A consulting

• Project complexity

Projects involving multiple stakeholders or operations across different regions are more complex and require greater consultancy involvement.

• Consulting expertise

Consultancies with extensive experience and market recognition may command higher fees due to their proven ability to deliver results.

• Transaction scale

The size of the business directly affects the cost, with larger transactions often resulting in lower percentages but higher absolute values.

• Strategic alignment of investment thesis

A consultancy’s ability to develop an investment thesis that clearly aligns opportunities and needs for both parties can be a critical differentiator.

Tips for negotiating with M&A consultancies

Before signing a contract, it’s essential to discuss and clearly understand the scope of services. Aligning expectations regarding outcomes and project timelines and evaluating market rates are recommended practices that help ensure a fair and transparent agreement.

How Upside Investment can assist

At Upside Investment, we recognize the importance of specialized consulting that delivers tangible results. If you’re seeking a reliable partnership for your next M&A transaction, our team of experts is ready to provide the necessary expertise, ensuring your investment’s success.

Choosing the right consultancy is a fundamental step in the M&A process. Consider not only costs but also service quality and consultancy experience. With the right choice, the consultancy can not only facilitate the transaction but also maximize the value of your investment.