Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

November 4, 2018

What To Pay An M & A Advisor

By Jeremy Albelda

check

As expected, the issue of fees in M&A transactions is raised quite frequently by clients.  “Indeed, selling a business will result in different types of fees and taxes,” says Achim Neumann, President, A Neumann & Associates, LLC, a New Jersey based Mergers & Acquisitions advisory and Business Brokerage firm, “and at the end there are commonly three deductions.”

First, a seller typically pays an upfront fee for a valuation ofthe business. Short of a retainer scenario where the valuation is generated by the M&A advisor firm out of a retainer fee – somewhat a conflict of interest – a business owner will have usually a third party, accredited valuation firm establish a value for the company to be sold.

Upon closing, there is the cost of taxes to be paid by the business seller. This can be significant, depending on the type of transaction (Stock vs. Asset) and the type of company (LLC vs. Corporation). A qualified CPA can establish a tax estimate for the seller once a valuation has been put into place with an approximate deal size and structure. Early planning for a sale of a business will go a long way in reducing potential taxes.

Finally, there are the fees for the M & A Advisory / Business Brokerage firm. Essentially, there are two types of fees for M&A Advisory firms 

  • back-end fee (contingency fees due upon deal closing) 
  • retainer fees (upfront fees)

Generally speaking, back-end firms collect their fees at the closing table upon completion of a transaction. Accordingly, they typically cover the upfront expenses of preparing and selling a business – often amounting up to $40,000+ in the lower mid-market – and only work with rigorously written engagement agreements to ensure that fees are paid at the end and said upfront fees are recovered.  Accordingly, they are allowing for few changes to their engagement agreement with a business seller.

Alternatively, there are retainer M&A firms which typically capture a hefty upfront fee (very much like attorneys), typically, for a third of the commissions, payable over the initial engagement period. Needless to say, given that the significant upfront expenses of marketing the business are somewhat mitigated by the retainer, it allows for lesser stringent engagement agreements. However, such firms might not have the same ‘motivation’ to sell – given the fees were already captured.

“From our end, we are indifferent to what type of agreement a seller choses, but we know that most business owners prefer a non-retainer scenario, “ says Neumann, “at the end both parties need to be comfortable with the arrangement.”

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or info@neumannassociates.com

Leave a Reply

Your email address will not be published. Required fields are marked *

Any questions? Please contact us at 732-872-6777
Call Now

Client Testimonials

“ I appreciate your diligent approach to screening buyers and sellers as well as the high quality CIM that you produce.”

Andrey O, Investor

“Finally enjoying retirement after recently selling my business using the services of A Neumann & Associates. Joe Oddo provided the conduit to a successful transaction. Joe knew when to inject input and when to simply listen and allow the buyers to vent, step back and regroup. The outcome met our expectations and got us to the finish line, which included my staying with the company six months in order for the buyers to get their footing and keep our workforce in the loop. He helped at every step by providing his expert guidance & resources. Thank you!”

Emily Parker Myers, Co-Owner - Myers McRae

“I had been in touch with Karin and Gary from A Neumann & Associates regarding some opportunities and was looking forward to meeting with them. Hence, when they organized a seminar in Princeton, NJ, I was quick to sign up. The seminar was very informative as the team walked the attendees through various scenarios and referenced real life buying/selling situations they had been through. The sessions by Gary, Karin and Achim were crisp and focused and brought clarity to potential seller and buyers. I strongly recommend the team and look forward to continue working with them.”

Gaurav Tyagi

“Thank you for your Event on "How to value, Sell, and Buy A Business for Maximum Profit" and the insight into ANA’s approach on what is involved in the Business Exit for sellers. Garys Hervieiou's "Business Valuation", Achim's "Deal structure" presentation and Karin’s "Preparing the Package" are real street knowledge shared. They answered attendees questions which makes it more interesting for learning from others. Great for small businesses like us. The presentations were totally worth our time and travel for the event to Princeton, NJ from Rockville MD. Ravi Bhutani, President, CIPS”

Ravi Bhutani

“Gary, this is to thank you for an excellent job done in selling our business. We could never have done it without your professional expertise, dedication and time put in without reservation to make it happen. We will gladly and highly recommend you to anybody in our position.  It was a pleasure to work with you.”

Pat Iammatteo, Owner

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi
view all testimonials

Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

call us now
Contact Us for a Free, Confidential Consultation

Experienced M&A Advisors available

Full Name
Email Address
Phone Number
Message