The real economics of no-fee M&A advice
If the seller is not paying, ask who is and whose interests control.
Owners sometimes receive an offer of “free” help with a sale. The offer may come from an acquisitive company, a buyer’s representative, a lender, or an intermediary whose compensation is not immediately visible.
Free does not necessarily mean improper. It does mean the owner should understand the economics and the duty being performed.
A buyer-side adviser is normally paid to help the buyer source opportunities and acquire them on favorable terms. A lender may expect financing business. A marketplace may receive a referral fee or buyer subscription. An intermediary may be paid only if a particular transaction closes. Those arrangements can create useful introductions, but they are not the same as independent sell-side representation.
Ask four questions: Who pays the adviser? When is the fee earned? Which party is the client? Does the adviser receive compensation from any other participant in the transaction?
A sell-side engagement usually states the retainer, success fee, reimbursable expenses, minimum fee, transaction-value definition, termination rights, and tail period. Those terms should be reviewed as carefully as the fee percentage. Owners should also understand whether a potential conflict is disclosed, managed, or unacceptable.
The issue is not whether advice carries an invoice. It is whether the owner knows whose objective the advice is designed to advance.