New clients often ask us what they should expect in the way of fees when they sell their business. While the costs involved depend on the specifics of the deal, virtually every transaction requires expenses for attorneys, M&A bankers, and accountants. In our Q1 2022 survey (M&A Survey Q1 2022), we asked clients, accountants, attorneys, and fellow investment bankers what they have recently paid/charged for their services for M&A transactions in the middle market of the aerospace and defense industry, using a $50 million transaction figure as the reference point for their responses. The following were the averages of their responses:
- Accounting fees = .78% of transaction value
- Legal fees = 1.14% of transaction value
- M&A banking fees = 1.91% of transaction value
These estimated basic fees total 3.8% on a $50 million deal.
As mentioned in the February 7, 2023, edition of Deal Notes®, some transactions include Representations and Warranties Insurance (”RWI”). Premiums for RWI have fluctuated since 2019 but seem to be settled now around 3%-4% of the policy amount, which is typically 20% of the purchase price, for deals in the $50 million range. When RWI is added to the basic fees shown above, estimated total fees increase to roughly 4.5% of the transaction amount.
Transactions may also involve other, smaller fees, for various services such as unique seller due diligence support, and specialized tax and regulatory advice. We will address some of those issues in a future Deal Note®.
In summary, unless the situation is abnormal, we advise our clients in the middle market to initially budget 5% for transaction costs.
Have a great day, everyone.
Managing Director, Aerospace