Most founders ask about fees in the first call. They should. Fee structure predicts advisor behavior more reliably than any credential, and the structures themselves take about ten minutes to understand.
This page publishes the standard components of M&A advisor fees: the retainer, the success fee, the Lehman formula and its variants, tiered ladders, and minimum fees. It also states what Windsor Drake charges. For how the fee connects to the sell-side mandate it funds, see our advisory services and the sell-side process explained.
What do M&A advisors charge to sell a business
Investment banker fees for selling a business have two components in nearly every mandate: a retainer paid during the engagement and a success fee paid at closing. The Axial and Firmex M&A Fee Guide, 2021 to 2022 survey edition, reports that among advisors charging monthly retainers, 40 percent charge $5,000 to $10,000 per month and 20 percent charge more than $15,000. The same survey found that 72 percent of advisors credit the retainer against the success fee at closing.
The success fee scales inversely with deal size. Per the Axial and Firmex data, transactions of $5 million to $10 million most commonly carry fees of 4 to 6 percent, transactions of $20 million to $50 million carry 2 to 4 percent, and transactions above $100 million carry 1 to 2 percent.
| Fee component | Typical range by enterprise value band | What it is actually paying for |
|---|---|---|
| Monthly retainer | $5,000 to $15,000 per month below $50 million EV; $15,000 to $50,000 above | The 8 to 12 week preparation phase: financial rebuild, information memorandum, model, data room, buyer research. None of it is contingent, so none of it can be funded by a contingent fee. |
| Success fee, below $10 million EV | 4 to 6 percent | Full process execution on a base too small for the percentage alone to cover fixed cost. |
| Success fee, $10 to $50 million EV | 2 to 4 percent | Market construction and negotiation across 40 to 80 contacted buyers, run at the senior level. |
| Success fee, $50 to $150 million EV | 1 to 2 percent | The same work; the percentage falls because the base rises faster than the cost of execution. |
| Minimum success fee | $400,000 to $750,000 at boutique firms | A floor that keeps senior staffing on transactions whose percentage fee would not otherwise pay for it. |
These are market ranges, not quotes. Sector, preparation state, and process scope move individual proposals inside and outside them.
What is the Lehman formula
The Lehman formula is a success fee schedule developed at Lehman Brothers in the late 1960s. It pays 5 percent of the first $1 million of transaction value, 4 percent of the second, 3 percent of the third, 2 percent of the fourth, and 1 percent of everything above $4 million. Advisors call it 5-4-3-2-1. The Axial and Firmex survey found 21 percent of firms still price with Lehman or a variant of it.
Classic Lehman on a $25 million transaction
The arithmetic on a $25 million enterprise value sale runs as follows. 5 percent of the first $1 million is $50,000, 4 percent of the second is $40,000, and 3 percent of the third is $30,000.
2 percent of the fourth million adds $20,000, and 1 percent of the remaining $21 million adds $210,000. The total is $350,000, an effective rate of 1.4 percent.
That number explains why almost nobody uses classic Lehman anymore. The schedule was written when $25 million bought what roughly $200 million buys today, and a $350,000 fee does not fund a senior-staffed nine-month process.
Double Lehman on the same transaction
The modern replacement doubles each band: 10 percent of the first $1 million, 8 percent of the second, 6 percent of the third, 4 percent of the fourth, and 2 percent of everything above $4 million. On the same $25 million transaction that is $100,000 plus $80,000 plus $60,000 plus $40,000, plus 2 percent of the remaining $21 million, which is $420,000. The total is $700,000, an effective rate of 2.8 percent. That lands inside the 2 to 4 percent band the Axial and Firmex data shows for deals of this size.
How do tiered and reverse-tiered fee ladders work
A tiered ladder raises the percentage above agreed thresholds. A common form on a deal with a $25 million expected value: 2 percent on proceeds up to $25 million, 4 percent on proceeds between $25 million and $30 million, and 6 percent above $30 million. The advisor’s marginal compensation is highest exactly where the seller’s marginal dollar is hardest to win. Per Axial and Firmex, 39 percent of advisors use scaled structures of this kind.
Lehman is the reverse. It pays the most on the first millions, which any signed deal would deliver, and 1 to 2 percent on the increment that separates a strong outcome from a passable one. A reverse-tiered ladder compensates showing up. A tiered ladder compensates the last 20 percent of price, which is the only part of the price that was ever in question.
What does a minimum fee do on a small deal
Sixty-seven percent of advisors set a minimum success fee, per the Axial and Firmex survey. At the boutique level these floors typically run $400,000 to $750,000. The clause exists because a percentage fee on a small transaction does not cover the cost of senior-led execution.
Watch what the minimum does to incentives. Take a $6 million sale with a 5 percent fee and a $500,000 floor. The percentage only exceeds the floor above $10 million in proceeds, so between $6 million and $10 million the advisor earns $500,000 regardless of price.
Every dollar of improvement in that band pays the advisor nothing, and the rational move becomes closing fast, not closing high. A founder selling below a firm’s minimum should read that minimum as a statement that the deal sits below the firm’s economics, and staffing will reflect it.
What is the success fee actually paying for
The fee funds market construction. Windsor Drake’s Buyer Tiering Model starts from an acquirer universe of more than 200 names in each sector we cover and screens it to the 40 to 80 buyers who receive outreach. Tier 1 holds 5 to 10 parties with a clear acquisition thesis and confirmed capacity to pay. Tier 2 holds 10 to 20 that need validation before they earn a seat. Tier 3 holds 15 to 30 opportunistic entrants whose presence keeps the first two tiers honest.
Building that market takes primary research, not a contact list. It means knowing which strategic and financial buyers hold a live thesis, which private equity firms buy SaaS companies at your revenue scale, and, in payments, who actually buys payments companies. The M&A success fee is the price of that map plus the nine months of execution it directs.
Why is the lowest-fee advisor the most expensive outcome
Fee pressure travels a fixed path. A discounted fee cannot fund senior hours, so the engagement moves to a junior lead. A junior lead cannot build a 40 to 80 buyer market from primary research, so outreach narrows to the 8 to 12 buyers the firm already knows. A narrow list produces one or two bidders at the indication stage instead of five to eight, and a process with one bidder is a bilateral negotiation with extra paperwork.
The gap between bilateral and competitive outcomes is commonly put at 15 to 25 percent of enterprise value. On a $25 million transaction, one percentage point of fee is $250,000. Fifteen percent of value is $3,750,000. A founder who saves the first number and gives up the second has paid 15 times the discount.
Why do advisors charge a retainer
The retainer funds the 8 to 12 weeks of work that happen before any buyer hears the company’s name: rebuilding the financials to buyer standards, drafting the confidential information memorandum, building the model, populating the data room, and completing the buyer research described above. That work happens whether or not the deal closes, which is why it cannot ride on a contingent fee.
The retainer is also a screen, in both directions. An advisor who waives it is carrying the engagement on spec and will drop it the moment a mandate with better odds appears. A seller who will not commit a five-figure monthly retainer against an eight-figure outcome has already answered the seriousness question. Windsor Drake does not run a process without one. A founder who wants to see what the preparation phase covers before committing can start with a confidential valuation.
What does Windsor Drake charge
Windsor Drake prices at the top of the boutique range and does not discount. The firm takes fewer than 20 mandates a year across fintech, B2B SaaS, cybersecurity, and AI software, and each is staffed at the senior level from kickoff to close. Background on the firm is at the firm, and the engagement model is described under advisory services.
The fee is a quality filter. A founder who negotiates hard on the retainer is telling the advisor what the engagement will be like. We decline those engagements. To discuss a mandate, use the contact page.
What this means for a seller
Get every fee proposal in writing with the ladder, the floor, and the retainer credit stated. Ask each firm who will run the process day to day and how many buyers received outreach on their last three closed mandates. Read the lowest quote as a staffing plan, because that is what it is.
Questions founders ask
What is a typical M&A success fee on a $25 million sale?
Market data puts fees on $20 million to $50 million transactions at 2 to 4 percent of enterprise value, per the Axial and Firmex M&A Fee Guide, 2021 to 2022 edition. A double Lehman schedule on $25 million produces $700,000, an effective rate of 2.8 percent.
What is the Lehman formula in M&A?
A fee schedule paying 5 percent of the first $1 million of transaction value, 4 percent of the second, 3 percent of the third, 2 percent of the fourth, and 1 percent of the balance. Most firms that still use it apply the doubled version, known as double Lehman.
Is the retainer credited against the success fee?
Usually. The Axial and Firmex 2021 to 2022 survey found 72 percent of advisors deduct retainer payments from the success fee at closing. Confirm the credit in the engagement letter rather than assuming it.
How much do investment bankers charge to sell a business under $10 million?
Success fees of 4 to 6 percent are the most common band at this size, plus a monthly retainer of roughly $5,000 to $15,000. Minimum success fees apply at most firms; 67 percent of advisors surveyed by Axial and Firmex include one.
Why will Windsor Drake not work without a retainer?
The 8 to 12 weeks of preparation before buyer outreach cannot be funded by a contingent fee, and the retainer confirms the seller is committed to a process rather than testing the market.
Does Windsor Drake negotiate its fees?
No. The firm prices at the top of the boutique range and treats the fee as a filter for engagements where both sides are committed to the outcome.
Last reviewed July 28, 2026 by Jeff Barrington, Founder and Managing Director, Windsor Drake. Content on this page may be cited with attribution and a link to https://windsordrake.com/ma-advisor-fees/
