Success Fee

A success fee is the performance-based compensation of an M&A advisor, payable only if the transaction actually completes. It is calculated as a percentage of transaction value, and the definition of that reference figure moves the amount more than the percentage does: whether net financial debt, earn-outs and assumed pension obligations are included regularly makes a six-figure difference. A regressive Lehman-style scale is common, with the percentage falling as the price rises, sometimes combined with a progressive component above a target valuation to incentivise a higher outcome.

Retainers already paid are normally credited. Also to be settled are the timing of payment, as a rule at completion rather than signing, the treatment of contingent price components that only arrive later, and the tail clause under which the fee is still payable if a deal closes after the mandate ends with a buyer the advisor introduced.

Economically the fee forms part of the seller's transaction costs. Where it is payable by the target and remains outstanding at closing, it may be treated as a debt-like item in the equity bridge under the agreed definitions.