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Episode Summary
You’re sitting across from a banker or a broker who’s about to quarterback the biggest financial transaction of your life, and you have no idea if their fee structure is normal, generous, predatory, or somewhere in between. Your CPA does taxes. Your attorney does contracts. Nobody is sitting next to you saying, “Here’s the range, here’s what’s market, here’s the red flag.” That’s why I had Peter Lehrman back on the show. Peter is the founder of Axial.net and he just published the fourth M&A Advisory Fee Survey with Firmex, polling about 270 lower-middle-market sell-side intermediaries on how they actually charge. We got into the two-part pricing structure (a work fee plus a success fee), what’s normal for monthly retainers ($5K to $15K), the sliding scale success fees that typically run 1.5% to 6% for $5M-$50M deals, why brokers on sub-$5M businesses end up at double digits, and the exclusivity and breakup fee terms that quietly determine who keeps the leverage in the room. Real numbers, real ranges, and the questions that let you tell a serious advisor from one who just wants a fixed retainer with no skin in the game.
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## Top 10 Takeaways- A fixed upfront fee with no contingency is a red flag. Market norms put your advisor’s skin in the game.
- The standard structure is two parts: a work fee (retainer or hourly) plus a success fee at close.
- Retainers in the lower middle market typically run $5K to $15K per month. Not arbitrary. They filter serious sellers.
- Success fees scale inversely with deal size. 1.5% to 6% is the normal band for $5M-$50M businesses.
- Tiny businesses pay double-digit fees because the prep work doesn’t shrink with the revenue.
- You’re hiring a person, not a firm. Spend a year vetting before you sign an engagement letter.
- DIY exits stall because selling your company is a full-time job you’ve never done before.
- Negotiate your success fee to track the cash. If the buyer holds back in escrow or earn-out, your banker waits with you.
- Buyer exclusivity (60 to 90 days) is the single most important term to fight for after price.
- Clean books are what makes everything downstream work. No information memorandum can fix a messy ledger.
Sound Bites
“If a business owner is being pitched a fixed upfront fee with no contingency fee, I’m comfortable going on the record saying that’s a pretty big red flag.” (@TBD) — Peter Lehrman
“You don’t wanna hire a firm. You wanna hire a person inside of that firm who seems to be really competent and very interested in working with you.” (@TBD) — Peter Lehrman
“They’re going to be representing all of your most important needs and wants in your biggest Super Bowl.” (@TBD) — Ryan Tansom
“Did the business owner prepare their business so that it could be financially understood by an arm’s length buyer? If the answer is yes, a lot of stuff kind of flows relatively positively from that. If the answer is no, everything good that comes after that process is sitting on a house of cards.” (@TBD) — Peter Lehrman
About This Episode
Peter Lehrman is the founder and CEO of Axial.net, an M&A deal sourcing platform that privately connects buyers and sellers of lower-middle-market businesses. Axial works with roughly 1,500 active sell-side intermediaries in any rolling 12-month period, with about 90% of platform deal activity led by professional advisors. Peter partnered with Firmex on the fourth annual M&A Advisory Fee Survey, polling about 270 lower-middle-market intermediaries on how they structure retainers, success fees, and engagement terms. This is Peter’s third appearance on the show, making him one of the few voices Ryan brings back specifically to demystify the mechanics of selling a privately held company.
Resources Mentioned
- Axial — Peter’s company. M&A deal sourcing platform connecting professional buyers and sell-side intermediaries. — axial.net
- Firmex — Virtual data room provider, co-publisher of the M&A Advisory Fee Survey. — firmex.com
- M&A Advisory Fee Survey — The Axial + Firmex survey of ~270 lower-middle-market sell-side intermediaries on fee structure norms.
- Walker Deibel, Buy Then Build — Referenced as the upcoming guest on acquisition entrepreneurs and search funds.
Connections
Phase + Module:
- Module 9 — Operator Transition — The transition playbook where advisor selection and engagement terms live
- Module 3 — Owner’s Playbook — The seat where you make the hire/fire decision on outside advisors
Milestones:
- Milestone 5 — Market Value — What an arm’s length buyer will actually pay
- Milestone 6 — Transaction Value — Net proceeds after fees, escrow, earn-outs, and structure
- Milestone 25 — Operator Transition Plan — Where the intermediary engagement plugs into the broader transition
Concepts referenced:
- Enterprise Value vs. Equity Value — The base the success fee is calculated against
- Normalized EBITDA — The earnings number the banker tells the story around
- Three-Statement Model — The financial preparedness Peter calls the difference between success and a house of cards
- Value Gap — The cost of going to market without the prep work done
Related episodes:
- Ep. 287 — Walker Deibel - Buy Then Build — Companion view from the buyer side of search and acquisition