Guide
M&A advisory retainers: what they buy and how they are credited
Updated
A retainer is not a deposit. It is payment for work that happens whether or not the business sells, which is exactly why the credit clause matters more than the amount.
What a retainer is paying for
The months before a business goes to market are the expensive part of an advisory mandate: financial analysis and normalisation of earnings, the information memorandum, the buyer list, and the research behind it. A retainer funds that work. An advisor charging nothing up front is funding it from the success fee, which is a legitimate model but changes their incentives: they are paid only if something completes, at whatever price completes.
- Retainer or work fee
- A monthly or fixed sum payable during the mandate, usually for a defined preparation period rather than open-ended.
- Credited
- The retainers already paid are deducted from the completion fee. Full credit is common; partial credit and no credit both exist.
- Non-refundable
- The money is not returned if the deal does not complete. Almost all retainers are non-refundable; that is separate from whether they are credited.
- Abort fee
- A sum payable if the seller withdraws after a defined point, distinct from the retainer and often a larger number.
The credit clause is the whole negotiation
Run two identical mandates through the calculator: a £5,000,000 sale on a Double Lehman scale with £5,000 a month for six months. With full credit the total advisor fee is £300,000, because the £30,000 of retainers is deducted from the completion fee. Without credit the total is £330,000. The retainer figure did not change. The clause did.
We do not publish a typical retainer figure
You will find sites that do. There is no official source for it, retainers vary by mandate size, sector, preparation state and the advisor's own model, and a made-up range would only anchor your expectations in the wrong place. What is worth doing instead is asking three questions: what specific deliverables does the retainer cover, over how many months, and what happens to it if the sale is paused.
Ask for the retainer to stop, not merely be credited, once the business is in the market. Preparation is finite; a retainer that runs for the life of the process is paying for the same work twice.