Investment Banking Fees

My post praising the value of investment bankers led to a number of e-mails asking for the parameters for investment banking fees for M&A. Here is the retail M&A price list from a first tier investment bank:

Aggregate value of transaction – Aggregate fee as a % of the transaction

    $20 billion – 0.150%
    $15 billion – 0.180%
    $12.5 billion – 0.200%
    $10 billion – 0.230%
    $9 billion – 0.240%
    $8 billion – 0.250%
    $7.5 billion – 0.265%
    $7 billion – 0.275%
    $6 billion – 0.300%
    $5 billion – 0.320%
    $4 billion – 0.360%
    $3 billion – 0.400%
    $2 billion – 0.450%
    $1 billion – 0.600%
    $900 million – 0.625%
    $800 million – 0.650%
    $700 million – 0.700%
    $600 million – 0.700%
    $500 million – 0.800%
    $400 million – 0.900%
    $300 million – 1.000%
    $200 million – 1.200%
    $100 million – 1.500%
    $50 million – 2.000%

As I mentioned before, those are retail prices so you might be able to shave a bit from those. Also, at lower price points and/or in deals that are less likely to happen you likely to have a retainer (say $50k) and a minimum transaction fee (say $750k).

Sometimes, if I have a good understanding of the value of the company, I also structure deals giving bankers an upside for selling the company at a premium to my expected value. For instance if I think the company is worth $100 million, I might pay 1.5% on the first $100 million, but 2% on the next $50 million and 2.5% after that. You need to realize that the marginal value of the extra million is worth a lot more to the shareholders than to the bankers who would rather get the deal done.

I hope this provides good guidance!

Side note: IPO fees are very different. For IPOs where the market cap is below $400 million the bankers take 7% of the proceeds split between the book runner and the co-managers.

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  • As a former M&A banker I’d thought I’d just comment that I never saw an engagement agreement where there was not an upfront retainer and a minimum transaction fee.

    I love how you posted all this info – it’s great for the entrepreneurs to have this in their backpocket when negotiating fees with bankers.

  • Great info — also, great organic listing.

    Curious to know:
    [1] what is % from $10-$50 million?
    [2] what is a typical retainer? Does it go toward the deal fee?
    [3] is capital raise [v. M&A] on a different pricing structure?

  • Great site.

    Just add to the debate, I have been involved in three sub US$200m raises and we never paid a retainer. Don’t let the bank push you, further you can often get the lawyers to drop the retainer.

    Just push hard, it is your market I-banks know days are a dime a dozen and all offer similar skills. Shop around.

  • This list is VERY low. I’m not sure where Fabrice is “shopping” for investment banking talent but these prices are easily 30% discounted at the sub $5Bn breakpoints. I am a M&A banker here in NYC and I and our MDs have never quoted fees anywhere near these. I guess if you are looking at lower tier firms maybe but not top talent.

    Ethan

    • Ethan:

      This came from a Lazard “cheat sheet”. I agree it feels low, especially at the low end of the price range. For sub-$50 million deals, I have often seen $50k retainers + 3-4% with a $500k minimum.