Typical M&A Fees By Deal Size

Curious about the cost of top-tier M&A advisory? Explore M&A fees by deal size and see what it takes to close big deals, using insights from recent M&A Morgan Stanley deals. Discover the strategic pricing behind successful mergers and acquisitions. How do fees scale with transaction size? What drives these costs?

Typical M&A Fees By Deal Size

Merger and Acquisitions (M&A) fees significantly vary based on the transaction size and its complexity, as well as the services rendered by the investment banks or advisors. Here is a general accounting of m&a fees by deal size:

Investment Banking Success Fees

The most common M&A fees are success fees, which are also known as contingency fees. These fees are contingent and are only paid when the transaction is completed. Success fees are calculated as a percentage of the transaction value.

Small Deals (< $50 million) – Success Fee: 4% to 7%

Mid-Market Deals ($50 million to $500 million) – Success Fee: 2% to 4%

Large Deals ($500 million to $1 billion) – Success Fee: 1% to 2%

Mega Deals (> %1 billion) – Success Fee: 0.5% to 1%

Retainer Fees

Retainer fees are upfront fees paid to the investment banking firm or advisors at the beginning of the M&A engagement. The retainer is credited to the success fee upon the transaction’s closure.

Typical Fee Range - $50,000 to $500,000 depending on the deal size and complexity.

Minimum Fees

To ensure an M&A engagement is financially viable, many investment banking firms and advisors have minimum fee thresholds. This is very common for smaller transactions.

Typical Fee Range – For mid-market deals, $500,000 to $2 million

Breakup Fees

Large, complex deals usually have a breakup clause written into the M&A Agreement. Breakup fees are paid if the transaction falls through due to specific conditions. This fee can be structured to hold both the buyer and seller responsible for paying it under different circumstances. It is more common to have one party obligated to pay the fee.

Typical Fee Range – Usually 1% to 3%, however, break fees vary significantly

Peripheral Fees

Advisory Fees – There may be additional advisory fees for services provided pre, duration, and post transaction. This is a common fee in large, complex deals.

Due Diligence and Legal Fees – In addition to investment banking and advisory fees, legal, accounting, and due diligence fees are common M&A transaction charges. These fees are size and complexity-dependent and are billed hourly or as a fixed fee.

M&A transaction fees are highly variable with negotiations having a significant impact on structure and dollar amount. Smaller deals command a higher deal size percentage because of the high fixed costs relative to the smaller revenue generated. Large deals benefit from economies of scale, resulting in lower fee percentages.

How does Morgan Stanley’s m&a fees by deal size compare to what we know so far?

Morgan Stanley M&A Fees by Deal Size

Morgan Stanley is one of the premier global investment banks with a well-earned stellar reputation for handling large and complex M&A transactions. As previously mentioned, the bank’s fees vary widely depending on deal size, the specific services provided, client/bank negotiations and the complexity of the transaction. Below are the typical m&a fees by deal size charged by Morgan Stanley:

Deal Size	Estimated Success Fee Range	Comments
<$100 million	2% - 4%	Higher fee percentage due to the complexity and resource intensive nature of smaller deals.
$100 million - $500 million	1.5% - 3%	Mid-market deals with slightly lower fees, but still resource intensive.
$500 million – $1 billion	1% - 2%	Larger deals benefit from economies of scale, leading to lower percentage fees.
>$1 billion	0.5% - 1.5%	Mega deals typically have lower percentage fees but still represent substantial dollar amounts.
>$5 billion	0.2% - 0.75%	Very large deals often have highly negotiated fees, with percentages decreasing further.

Here are a few recent M&A transactions, along with estimated fees based on deal size that Morgan Stanley acted in an advisory capacity:

Broadcom's Acquisition of VMware - Morgan Stanley’s fees ranged from $200 million to $450 million for advising on this large and complex transaction, depending on the structure of the success fee and the resources provided.

United Technologies' Merger with Raytheon - This massive $100+ billion merger involved one of the highest fees, given the deal's size and complexity. Morgan Stanley potentially earned between $200 million and $750 million.

LVMH's Acquisition of Tiffany & Co. – This prestigious and high-profile luxury goods acquisition generated estimated fees of $50 million to $100 million.

IBM's Acquisition of Red Hat - Given the $34 billion deal size, Morgan Stanley earned between $100 million and $250 million.

EQT's Acquisition of Nestlé Skin Health - Morgan Stanley earned fees in the range of $30 million to $70 million from this $10 billion deal.

These transactions illustrate how Morgan Stanley's fees are typically structured based on deal size and complexity, with larger transactions commanding lower percentage fees but still resulting in substantial revenue.