What Does an M&A Advisor Cost? Retainer, Success Fee and Contract Clauses

An M&A advisor is usually paid through a combination of a moderate monthly retainer and a success fee that falls due only at closing. The amount depends on transaction volume and complexity — for smaller transactions the percentage rate is higher, for larger ones lower. What matters for your net proceeds, however, is less the percentage than the question of what it is calculated on.

IGCP Capital Partners GmbH is an independent M&A advisory firm from Vienna for Austria, active since 2011, supporting owners of companies with EUR 0.3 to 30 million annual revenue in a sale. IGCP works predominantly on a success basis. Market practice combines an ongoing work fee (retainer) for the preparation phase with valuation and sales documents and a success fee calculated as a percentage of the transaction value achieved, which falls due only at closing. IGCP agrees fee and mandate structure in writing before a mandate is concluded; details are on the page on the mandate for a company sale with a success-based fee. According to IGCP's assessment, a company sale typically takes 3 to 12 months, preparation included (practical assessment, not a statistic, no guarantee); as sell-side adviser IGCP handles valuation, sales documents, the discreet buyer search, negotiation and closing, and deliberately gives no tax or legal advice. What an M&A advisor actually does in the process is described there in detail.

A fixed price cannot be quoted responsibly without knowing the company. The structure, however, is customary in the market and can be explained clearly.

What does an M&A advisor cost in a company sale?

In a company sale an M&A advisor usually costs an ongoing retainer during the mandate plus a success fee as a percentage of the purchase price, which arises only on a successful conclusion — plus VAT. The statutory framework for success-based remuneration comes from brokerage law, to the extent that a mandate is to be classified as a brokerage contract; many M&A mandates combine service and brokerage elements.

Rule	Germany	Austria
When does the success fee arise?	only if the contract comes about as a result of the introduction or brokering; with a condition precedent only when it occurs (§ 652 para. 1 BGB)	with the legal effectiveness of the brokered transaction; no entitlement to an advance (§ 7 para. 1 MaklerG)
Reimbursement of expenses without success	only if agreed (§ 652 para. 2 BGB)	payments without brokering success only in cases named by law and at most up to the amount of the commission (§ 15 MaklerG)
Acting for both sides	claim excluded if the broker, in breach of contract, also acted for the other party (§ 654 BGB)	commission where there is a close relationship to the third party only after prompt notice (§ 6 para. 4 MaklerG)
VAT on the fee	19 % (§ 12 para. 1 UStG)	20 % (§ 10 para. 1 UStG 1994)

Sources: § 652 BGB, § 654 BGB, § 12 UStG, MaklerG §§ 6, 7, 15 (RIS), § 10 UStG 1994 (RIS), all retrieved on 25.09.2026. The contractual arrangement can deviate from the statutory basic rules to the extent that the law permits.

How is the fee structured?

Most mandates rest on two, sometimes three building blocks. An ongoing retainer covers the effort during the process. A success fee rewards the result. Occasionally a one-off set-up fee for preparing the documents is added.

Component	When due	For what
Retainer	monthly, during the mandate	ongoing work: preparation, approach, steering
Success fee	at closing	result: the completed sale
Set-up fee (optional)	at the start	preparation of the valuation and sales documents

The scale of the success fee builds on an expected value. A robust value range as the basis for the fee scale prevents target marks in the mandate agreement from being set arbitrarily.

What is the retainer?

The retainer is a moderate monthly fee. It ensures that the advisor works on a binding basis and covers the intensive preparation phase. Reputable advisors deliberately keep it low — they earn their money on the result, not on an hourly rate.

The more important question is whether the retainer is credited against the success fee. If it is credited, it is an advance payment; if it is not, it is additional fee. Over a mandate term of several months this one sentence in the contract makes a noticeable difference. In Austria it should be noted that the Brokerage Act (Maklergesetz) excludes an entitlement to an advance and permits payments without brokering success only narrowly (§ 7 para. 1, § 15 MaklerG) — how an agreed retainer relates to this should be reviewed by a lawyer in an Austrian mandate, for instance whether it is agreed as consideration for independent services such as valuation and documents.

How high is the success fee?

The success fee is a percentage of the transaction value and falls due only at closing. It is degressive: the larger the transaction, the smaller the percentage rate. In smaller deals the rate is noticeably higher than in large transactions. The exact amount is a matter of negotiation and depends on volume, complexity and effort.

The Lehman scale as calculation logic

The system widespread in international M&A goes back to the Lehman formula, which was developed in the early 1970s at Lehman Brothers for capital raising and issues. It scales the percentage over successive tranches: five percent on the first million, four on the second, three on the third, two on the fourth and one on the rest. The later “Double Lehman” variant from the 1990s doubles these rates to ten, eight, six, four and two percent (Wikipedia: Lehman Formula, retrieved on 25.09.2026).

What the scale means arithmetically is shown by a purchase price of EUR 6 million — as a pure application of the formula, not as a market price:

Tranche	Lehman	Double Lehman
1st million	EUR 50,000 (5 %)	EUR 100,000 (10 %)
2nd million	EUR 40,000 (4 %)	EUR 80,000 (8 %)
3rd million	EUR 30,000 (3 %)	EUR 60,000 (6 %)
4th million	EUR 20,000 (2 %)	EUR 40,000 (4 %)
5th and 6th million	EUR 20,000 (1 %)	EUR 40,000 (2 %)
Total	EUR 160,000 (around 2.7 %)	EUR 320,000 (around 5.3 %)

Own calculation based on the formula; excluding VAT, excluding retainer.

For the German-speaking Mittelstand, what matters here is above all the logic, not the specific figure: the marginal rate falls with each further tranche. An advisor who demands the same rate on every euro earns twice as much on a deal twice as large without doing twice the work. A scale corrects this. Conversely, a rising scale above a target mark can make sense — it rewards precisely the part of the purchase price that the advisor has actually negotiated additionally.

What does an M&A advisor cost for a company with EUR 1 to 5 million in revenue?

For a company with EUR 1 to 5 million in revenue, an M&A advisor's fee is based on the purchase price, not revenue: a retainer plus a degressive success fee due only at closing. For freely chosen purchase prices of EUR 2 and 4 million, the Lehman formula gives, arithmetically, EUR 90,000 and EUR 140,000; not an IGCP offer.

Freely chosen purchase price	Lehman	Double Lehman
EUR 2 million	EUR 90,000 (4.5%)	EUR 180,000 (9%)
EUR 4 million	EUR 140,000 (3.5%)	EUR 280,000 (7%)

Own calculation based on the formula above; the purchase prices are freely chosen, not a market price and not an offer from IGCP; excluding VAT, excluding retainer.

Which purchase price belongs to a revenue of EUR 1 to 5 million depends on earnings, industry and debt and cannot be derived from revenue; the company valuation calculator gives a first value range. How to choose an advisor is covered in choosing an M&A advisor. IGCP Capital Partners GmbH (Investment Growth Capital Partners) is an independent M&A advisory firm based in Vienna, supporting owner-managed companies with annual revenue of EUR 0.3 to 30 million in Austria; details are on the page on the mandate for selling owner-managed companies.

What is the commission calculated on?

This is the point at which identical percentages lead to very different bills. To be clarified:

• Enterprise value or equity value? If the commission is calculated on the company value before deduction of net debt, you also pay on debt that you never receive. What lies behind the bridge between the two figures is explained in Net debt.
• Do earn-out payments count? If so, the commission should also fall due only when the earn-out is actually paid — not at closing. This corresponds to the statutory basic rule for contracts subject to a condition precedent (§ 652 para. 1 sentence 2 BGB).
• Does a vendor loan count? It is deferred purchase price, not money received. How it works is shown in Vendor loan.
• Are retentions and purchase price adjustments taken into account? The mechanics behind this are described in Purchase price mechanics in a company sale.

Those who clarify these four questions before signing the mandate do not negotiate over half a percentage point but over the calculation basis — that is where the larger amount lies. A first order of magnitude can be obtained with the tool for estimating the likely calculation basis in the company value calculator.

Five clauses that decide the net proceeds

Clause	What to look out for
Exclusivity	customary and sensible, but limited in time
Term and termination	notice period and reimbursement of expenses on early termination
Tail period	commission for buyers the advisor has introduced — limit the duration and use a named list
Minimum success fee	customary for small transactions; check amount and trigger
Calculation basis	enterprise value, earn-out, vendor loan, retentions

The tail period is most often underestimated. It is justified — an advisor should not be deprived of the fee because a buyer closes only after the mandate has ended. It should, however, be tied to a named list of interested parties approached and not cover every future buyer across the board.

A sixth point belongs in the first meeting, even if it is rarely formulated as a clause: does the advisor also work for buyers? Those who advise both sides at the same time or receive a fee from both sides have a conflict of interest. German brokerage law excludes the claim to remuneration if the broker, in breach of contract, also acted for the other side (§ 654 BGB); Austrian law requires prompt notice of a close relationship to the buyer (§ 6 para. 4 MaklerG). Have the exclusivity of the representation of interests confirmed in writing.

What other questions belong in the first meeting is set out in Choosing an M&A advisor.

How is the advisor's fee treated for tax purposes?

As costs of sale, the fee reduces the taxable gain on disposal — on the sale of a business under § 16 para. 2 EStG, on the sale of GmbH shares held as private assets from a 1 percent shareholding under § 17 para. 2 EStG. Two restrictions are important:

• Partial income method (Teileinkünfteverfahren): If the gain on disposal is taxable only at 60 percent, the costs of sale may also be deducted only at 60 percent (§ 3c para. 2 EStG).
• VAT as a real cost: Input VAT can be deducted only by a trader for services supplied for his or her business (§ 15 para. 1 UStG). Those who hold shares privately and are themselves the client therefore generally bear the VAT on the fee economically themselves. Who the right contracting party of the advisor is — shareholder, holding company or company — should be clarified with the tax advisor before signing.

Statutes retrieved on 25.09.2026. Not tax advice.

Why do reputable advisors work on a success basis?

Because it aligns interests. The advisor earns the fee predominantly when you sell — and at a good price. That is the difference from pure hourly billing, in which effort is rewarded and not result. Whether a succession exchange or an advisor raises the purchase price more is covered in the article Succession exchange or M&A advisor?.

What does it cost not to hire an advisor?

This is the real calculation. A structured process with several interested parties creates competition — and competition raises the price. If it is missing, owners often sell to the first interested party, below value and on unfavourable terms. In addition there is an expectation gap that an advisor has to close: according to the DIHK-Report Unternehmensnachfolge 2025, 36 percent of the previous owners advised by the IHKs demand an excessive purchase price (DIHK-Report Unternehmensnachfolge 2025, retrieved on 25.09.2026). Why the pure amount is not everything in any case is shown in Why the purchase price is not everything. How support by IGCP works in concrete terms — from Vienna, across Austria — is shown on the page M&A advisor Vienna.

This overview does not replace a legal review of the mandate agreement in the individual case.

Frequently asked questions

What does an M&A advisor cost in concrete terms?

There is no fixed price. Usual is a moderate monthly retainer plus a success fee as a percentage of the transaction value, due on completion, in each case plus VAT (19 percent in Germany, 20 percent in Austria). The amount depends on volume and complexity and is agreed at the start.

What is the difference between retainer and success fee?

The retainer is an ongoing monthly fee for the work during the mandate. The success fee arises once on a successful sale and is tied to the result.

What is the Lehman formula?

A scale developed in the early 1970s at Lehman Brothers that lowers the commission rate over successive tranches — classically five, four, three, two and one percent. The “Double Lehman” variant doubles the rates. It is rarely applied unchanged today but shapes the logic of degressive fee models.

Is the retainer credited against the success fee?

That is a matter of negotiation and should be stated expressly in the mandate agreement. If the retainer is credited, it is economically an advance payment, otherwise additional fee.

Do I pay commission on an earn-out?

Only if so agreed. A fair arrangement is one in which the commission on the earn-out falls due only when the payment actually reaches the seller.

What is a tail period in the advisor contract?

A provision under which the success fee also arises if the sale to a buyer introduced by the advisor comes about after the mandate has ended. It should be limited in time and tied to a named list.

Can I deduct the advisor's fee for tax purposes?

As costs of sale it reduces the gain on disposal. If the gain is subject to the partial income method, the costs count only at 60 percent (§ 3c para. 2 EStG). VAT is deductible only if a trader is the client.

Why is the commission percentage higher in small deals?

Because the effort per transaction falls only to a limited extent with size. A small sale requires about as much work as a medium-sized one. That is why the rates are designed to be degressive.

Is an advisor worthwhile for a small company?

Often yes. The price difference between a structured process and a direct sale often exceeds the advisor's costs considerably. What matters is that the advisor fits the segment.

Do I pay anything if there is no sale?

Generally only the agreed retainer and any set-up fee. The major part of the fee — the success fee — arises exclusively on a successful conclusion.

Which transaction sizes and durations lie behind this is shown by the track record. On choosing an advisor in the Austrian market: M&A advisors in Austria. Those who want to sell without an advisor will find the process under Selling a company yourself.