M&A Advisory & Capital Sourcing Fees
Below is an overview of Waypoint Private Capital's fee structure. In every transaction type we work on, our interests are aligned with yours as the majority of our compensation is tied to the successful completion of your transaction.
M&A Advisory Fees
Selling a Business
Retainer: Upfront retainer due at the beginning of the engagement.
Success Fee: A success fee is due at the successful completion of the transaction.
Buying a Business
Retainer: Monthly retainer throughout the engagement.
Success Fee: A success fee is due at the successful completion of the transaction.
Capital Sourcing Advisory Fees
Debt Raise Financing
Retainer: Upfront retainer due at the beginning of the engagement.
Success Fee: A success fee is due at the successful completion of the transaction.
Equity Raise Financing
Retainer: Upfront retainer due at the beginning of the engagement.
Success Fee: A success fee is due at the successful completion of the transaction.
Things You Should Know
About Investment Banking Fees
Why Do Investment Bankers Charge a Retainer?
Investment bankers typically charge a retainer for several reasons:
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Commitment: A retainer demonstrates the client's serious commitment to the deal, ensuring they have "skin in the game."
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Resource Allocation: It helps cover initial costs and time spent on the project, allowing the investment bank to allocate resources effectively.
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Filtering Clients: Retainers help filter out less serious potential clients, focusing the investment bank's efforts on clients committed to completing their deals.
Why Do Investment Bankers Charge a Success or Transaction Fee?
Investment bankers charge a success fee (also known as a transaction fee) for several key reasons:
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Alignment of Interests: This fee structure aligns the investment banker's interests with the clients, as they get the majority of their compensation only when the deal is successful.
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Compensation for Results: It rewards the investment bank for achieving the desired outcome, whether that's completing the sale of a company, the acquisition of a company or raising capital.
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Incentive for Performance: The promise of a large success fee motivates the investment bankers to work diligently to close the deal and negotiate the best possible terms.
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Risk-Sharing: If the deal doesn't close, the investment bank may earn little or nothing beyond the initial retainer, sharing some of the risk with the client.
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Industry Standard: This model has become the norm in investment banking, setting client expectations and allowing investment banks to potentially earn significant fees on successful deals.
Why Do Investment Bankers Charge Their Clients for Deal-Related Expenses?
Investment bankers charge their clients for deal-related expenses for several practical and financial reasons:
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Cost Recovery: These expenses are direct costs incurred specifically for the client's deal, so investment banks appropriately pass them on to clients.
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Transparency: Itemizing and charging for specific expenses provides clarity on where money is being spent in the deal process.
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Customization: Different deals require different levels of expenditure, so charging separately allows for more accurate and fair billing based on each deal's needs.
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Industry Norm: This practice is standard in investment banking, setting client expectations across the industry.
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Incentive for Efficiency: When clients are directly responsible for expenses, they may be more judicious about approving costly activities, potentially leading to a more efficient deal process.
What is Fee Tail Period in a M&A or Capital Sourcing Engagement?
A fee tail period in M&A (mergers and acquisitions) or financing engagements refers to a specific clause in the agreement between an investment bank and its client. This clause is designed to protect the investment bank's interests and ensure fair compensation for their work. Here are the key aspects of a fee tail period:
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Definition: It's a set period after the termination of the engagement during which the investment bank is still entitled to their success fee if a transaction occurs.
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Purpose: It prevents clients from terminating the agreement just before a deal closes to avoid paying the success fee.
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Duration: Typically ranges from 18 to 24 months after the engagement ends, depending on the agreement.
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Scope: Usually applies to transactions with parties introduced by the investment bank or those the investment bank worked with during the engagement.
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Compensation: If a deal closes during this tail period, the investment bank receives their full agreed-upon success fee, even though they're no longer officially engaged.
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Industry Standard: This practice is common in investment banking to protect investment banks from potential exploitation of their services.
Why Do Investment Banking Firms Require Exclusivity in Their Engagements?
Investment banking firms typically require exclusivity in their engagements for several strategic and practical reasons:
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Resource Allocation: Exclusivity allows the investment bank to commit significant resources to the client's deal without fear of wasted effort.
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Conflict Prevention: It prevents potential conflicts that could arise from working with multiple parties on the same deal or with competing clients.
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Information Protection: Exclusivity helps maintain confidentiality and prevents sensitive information from being spread across multiple investment banks.
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Deal Momentum: Working with a single advisor can help maintain deal momentum and avoid conflicting strategies or advice.
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Compensation Assurance: It ensures the investment bank will receive compensation for their work if the deal is successful, without competition from other investment banks.
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Focus and Efficiency: The investment bank can fully focus on the client's needs without dividing attention among competing engagements.
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Market Perception: Exclusivity can signal to the market that the deal is serious and well-supported.
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Relationship Building: It allows for a deeper, more committed relationship between the investment bank and the client.
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Industry Standard: Exclusivity is a common practice in investment banking, setting expectations for both investment banks and clients.
Business Owners Who Hire an
Investment Banker to Sell Their Business Receive
25%+
higher valuation than if they sold
the business on their own.
1.5X+
higher EBITDA than if they sold the business on their own.
100%
highest customer satisfaction rating ('significant' +'moderate').
