M&A Service Costs (2026): What It Really Costs to Sell a Business — Fees, Budget, ROI

Short version: The “cost to sell” is not just the broker fee. It’s a full stack: advisor fees, legal, accounting/QoE, tooling (data room), deal-mechanics friction, and the internal cost owners ignore (time, distraction, performance dip). If you budget correctly, you reduce price chips and term pressure. If you under-budget, you get forced into a weak deal structure.

1) The Two Types of “Cost” Owners Confuse

Most owners only see the visible fees (broker, lawyer, accountant). Buyers see something else: risk. And risk turns into either:

• Cash cost (fees): you pay professionals to run the process and create buyer-grade proof.
• Equity cost (value loss): you pay the penalty through price chips and terms (earnouts, holdbacks, harsher indemnities) when proof and transferability are weak.

2) The Full Cost Stack (External + Internal)

Here is the full stack you should budget for. Not every deal needs every item, but most deals touch most of them.

You do not “avoid” these costs. You either pay them explicitly (fees) or implicitly (price + terms deterioration).

3) Advisor Fees: Structures, What You’re Paying For, and Why They Exist

An M&A advisor is not paid for “hours”. They are paid for probability, positioning, process control, and risk reduction.

3.1 Common fee components

• Monthly work fee / retainer: covers ongoing work and reduces the advisor’s risk if deals stall or fail.
• Success fee: paid at closing; usually a decreasing percentage as deal size increases.
• Minimum success fee: protects the advisor from being underpaid on smaller transactions relative to workload.
• Reimbursable expenses: commonly travel and accommodation (sometimes data-room or third-party costs, depending on the engagement letter).

3.2 What you get for these fees (in plain English)

• Buyer-grade packaging: proof-ready story, not marketing copy.
• Process design: staged disclosure, controlled deadlines, competitive tension.
• Risk pricing discipline: problems surfaced early; fixes or structure prepared before buyers weaponise them.
• Negotiation leverage: you negotiate with a playbook, not emotion and hope.
• Deal closure capability: keeping momentum through diligence, financing friction, and legal complexity.

4) Typical Fee Ranges by Deal Size (Reality, Not Fantasy)

Fees vary by market, sector, complexity, and buyer type. But the pattern is stable: smaller deals have higher percentage fees; larger deals have lower percentage fees.

4.1 Small business brokerage (often <$5m sale price)

• Broker commissions are commonly quoted as a percentage of sale price; one widely used range is 8%–12% for smaller deals, with variants of a “Modern/Double Lehman” style sliding scale for larger small-business transactions.
• Expect higher percentages when the business is harder to sell: weak financial reporting, high owner dependency, concentration risk, or messy compliance.

4.2 Lower-middle / middle market M&A advisory (often multi-million up to $100m+)

• Fee structures commonly combine a monthly work fee plus a success fee that declines as deal size increases.
• Illustrative “average” success fee levels in a widely-cited survey format include levels such as 6.3% (for $5m), 3.9% (for $20m), and 2.0% (for $100m)—with wide variation around each size band.

5) Professional Fees: Legal, Accounting, Quality of Earnings, Tax

These are the fees owners under-budget most often. They are not optional once serious buyers start diligence.

5.1 Legal (sell-side)

• What it covers: LOI/term negotiation support, sale agreement, disclosure schedules, risk allocations (indemnities, caps, baskets), closing mechanics, and often employment/lease/IP items.
• Why it matters: legal terms often move more money than headline price (earnouts, holdbacks, escrow, covenants).

Practical expectation: legal fees can be substantial. For example, one advisory breakdown aimed at business owners cites a total legal cost range of roughly $100k–$500k for a sale process and notes hourly rates can be high (deal complexity and jurisdiction drive outcomes).

5.2 Accounting + Quality of Earnings (QoE)

• Normalisation: turning reported profit into buyer-grade profit (defensible add-backs, owner comp, one-offs, accrual issues).
• QoE: buyers (and lenders) often use QoE to test sustainability of earnings and working capital. Sellers sometimes commission sell-side QoE to reduce surprises and protect valuation.
• Typical cost bands: a commonly cited range for QoE in the lower middle market is roughly $25k–$75k+, depending on complexity and scope.

5.3 Tax structuring and transaction planning

• Share sale vs asset sale (and local equivalents) can materially change net proceeds.
• Cross-border, earnouts, deferred consideration, and management rollover make tax planning more complex.
• Do not leave tax planning to “after LOI”. Your leverage is highest before terms harden.

6) Deal Tools + Deal Mechanics Costs (Data Room, Escrow, Financing Friction)

These are usually not the largest costs, but they become deal friction if neglected.

6.1 Virtual Data Room (VDR) + security hygiene

• VDR tooling is used for controlled disclosure, access tracking, and version control.
• Cost varies by provider and deal size; the bigger issue is not subscription price—it’s whether your documents are organised, consistent, and “diligence-ready”.

6.2 Escrow, reps & warranties mechanics, and financing

• If the buyer needs financing, expect more diligence and more time. That increases internal distraction and often increases third-party work.
• Working capital mechanisms and purchase price adjustments are where owners lose money quietly (because they didn’t model “normal” working capital).

7) The Silent Killer: Internal Costs (Time, Distraction, Performance Dip)

The most expensive “fee” is often unpaid: leadership distraction and operational drift while the deal runs.

• Time cost: owner attention shifts to deal work, and the business performance softens.
• Team risk: key staff may become anxious, especially when rumours start. Retention risk rises.
• Revenue risk: the moment performance dips, buyers reprice risk or use it as leverage.

8) Real Value vs Cost: The Only ROI Test That Matters

Stop asking “how much does it cost?” and start asking: what does it change?

8.1 The value levers fees can buy

• Higher certainty: more deals close (probability up).
• Lower discounts: fewer price chips (valuation preserved).
• Better structure: less earnout/holdback pressure (cash at close up).
• Faster process: less time in market (performance risk down).

8.2 A simple ROI test (use this on every spend)

• Expected value impact: (Increase in price + improved terms) × probability of closing improvement
• Minus: cash fees + internal disruption cost
• If positive: it is rational. If negative: you’re paying noise.

9) How to Budget + Negotiate Without Destroying Incentives

Fee negotiation is not about “cheaper”. It is about alignment and clarity.

9.1 What owners should push for (reasonable, market-aligned)

• Crediting work fees against success fee (common in market patterns).
• Clear definition of “transaction value” (what counts toward the fee: cash at close, earnout, rollover equity).
• Reasonable tail period (if a buyer introduced by the advisor closes later).
• Clear scope + deliverables (what is included vs out-of-scope).
• Expense policy clarity (travel, accommodation, data-room, third parties).

9.2 What owners should avoid (usually false economy)

• Choosing an advisor purely on the lowest %.
• Refusing readiness work, then blaming advisors when the deal becomes earnout-heavy.
• Hiding problems until diligence (buyers will discover them; you just lose control of timing).

10) Budget Checklist: What to Reserve Before You Start

This is a practical reserve list. Adjust for your jurisdiction and deal complexity.

• Advisor fees: monthly work fee reserve + success fee model (know the minimum).
• Legal reserve: sale agreement + disclosure schedules + negotiation cycles.
• Accounting/QoE reserve: normalisation + working capital analysis; QoE if required by buyer/lender profile.
• Tax reserve: structuring advice early (before LOI locks you in).
• Tools reserve: data room + e-sign + security hygiene (small cost; high leverage).
• Internal reserve: leadership bandwidth + a “keep performance stable” plan (owner delegation, KPI cadence, customer coverage).