THE SHORT ANSWER
Compare written engagement terms, not advisor labels or a headline commission. Define what value the fee applies to, when it is earned, whether upfront payments are credited, which expenses are extra and what remains due after termination. A seller note, earnout, retained equity or real estate can change the calculation depending on the contract.
Define the fee base before applying the rate
Ask the advisor to mark the exact definition of transaction value. Does it include assumed debt, working capital, inventory, retained cash, rollover equity, real estate, seller financing or contingent consideration? Identify what is included and whether a minimum fee overrides the percentage calculation. Do not substitute enterprise value, equity value or closing cash for the agreement’s definition.
The ABA distinguishes transaction price and payment terms; the fee agreement must be reviewed against your actual consideration.
(ABA: key stages of an M&A transaction)Request worked calculations for the proposed structure and a downside case. A quote using one definition cannot be fairly compared with a quote using another.
Count a credited retainer once
| Hypothetical term | Quote A | Quote B |
|---|---|---|
| Identical defined fee value | $1,000,000 | $1,000,000 |
| Success fee calculation | 6% = $60,000 | 8% = $80,000 |
| Upfront payment | $10,000, credited against success fee | $0 |
| Remaining success fee at closing | $50,000 | $80,000 |
| Additional expenses | $5,000 | $2,000 |
| Total paid if this sale closes | $65,000 | $82,000 |
Quote A totals $10,000 + $50,000 + $5,000 = $65,000. Its upfront payment is part of the $60,000 fee, not an extra $10,000. Quote B totals $82,000; the difference is $17,000 for this illustration. These are not Jaken prices or market rates. If the upfront amount is noncreditable, the outcome changes. Confirm the credit, refund and payment provisions rather than inferring them.
Review payment timing and exit provisions
Ask when amounts are earned and payable: engagement, offer, signing, closing or later receipt of consideration. If a note or earnout is included in the fee base, ask whether you must pay a fee before collecting that money and what happens if it is never paid. A fee based on maximum contingent proceeds can be very different from one based on actual receipts.
Review exclusivity, term, renewal, termination, named exclusions and any post-termination tail. Ask which buyers and transactions a tail covers and how introductions are documented. Confirm expense approval, caps, invoicing, sale cancellation and any dispute process with counsel.
Compare scope alongside the total cost
Identify which preparation, marketing, negotiation and coordination services are included and which professional services require separate engagements. Compare the assigned team and reporting commitments as well as dollars. Neither a retainer nor a success-only structure proves quality or a conflict-free process.
Keep the quote calculations separate from estimated taxes, debt settlements and your eventual net proceeds. The proceeds planner organizes supplied assumptions; it cannot interpret a tiered engagement, minimum fee or retainer credit for you. Enter a reconciled cost after reviewing the contract. Use the service-fit comparison to evaluate whether the proposal covers your needs.
Owner questions
Is there one standard Lehman formula?
Do not rely on a formula name. Obtain the actual tiers, boundaries, fee base, minimum and worked calculation in the engagement.
Does a success fee mean nothing is due if the sale fails?
Read the agreement. Upfront charges, expenses, termination provisions or other obligations may still apply.
Does the example establish Jaken’s rates?
No. Both quotes are hypothetical and illustrate accounting for a credited upfront payment.
Sources and review scope
Source review completed . The sources below support the identified concepts or rules; they do not validate hypothetical amounts or a valuation of your business.
- ABA: key stages of an M&A transaction
Transaction architecture, diligence and the interaction of price terms, liabilities and consents; conceptual education, not a deal-specific legal determination.
Confirm tax, legal, accounting and lending applications with the relevant professionals. Historical market observations describe the stated period and reported sample.
This is educational material. Industry figures and program rules can change; check the original sources and your advisors before applying them to a transaction. Calculator scenarios are not appraisals, lending decisions, or offers.
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