Why Your M&A Success Fee Should Be Based on What You Actually Receive
Enterprise Value makes for a compelling headline number — but sellers rarely see all of it. There is a better way to align advisor incentives.
The gap between EV and what lands in your pocket
When a business sells for £30 million, champagne is uncorked and congratulations exchanged. But that headline figure — Enterprise Value — is not the cheque the seller receives. It is a starting point for a series of deductions that can materially erode the proceeds, often after the advisory engagement has formally concluded.
The convention of calculating M&A success fees on Enterprise Value is so deeply embedded in market practice that most sellers accept it without question. That does not make it right.
A £30m example: where does the value go?
Consider a business sold for £30m EV. Before the seller sees a penny, the following adjustments are typically applied:
| Enterprise Value agreed | £30,000,000 |
| Less: net debt repaid on completion | – £5,500,000 |
| Less: working capital shortfall | – £1,200,000 |
| Equity Value received by seller | £23,300,000 |
The advisor's fee, calculated at 3% of EV, would be £900,000. The same rate applied to Equity Value would be £699,000:
| Basis | Fee (3%) | Difference |
|---|---|---|
| On Enterprise Value (£30m) | £900,000 | — |
| On Equity Value (£23.3m) | £699,000 | – £201,000 to seller |
That difference — £201,000 — is paid by the seller to the advisor on value they never received.
Equity Value is itself a negotiation, not a fixed number
What makes this more complex is that Equity Value does not emerge automatically from the agreed EV. It is the outcome of hard-fought negotiations over definitions: what constitutes debt, what is treated as cash, and what level of working capital is considered normal. These are not merely technical accounting matters — they are high-stakes commercial negotiations where imprecise drafting can cost sellers hundreds of thousands of pounds.
The precise wording of completion accounts financial definitions, locked-box leakage provisions, permitted leakage carve-outs and earn-outs can each shift the economics significantly. A seller whose advisors cannot draft and defend these provisions with technical authority is, in practice, negotiating with one hand tied behind their back.
Post-closing: when advisors have moved on
For deals structured on a completion accounts mechanism, the exposure does not end at signing. Post-closing, the parties revisit the accounts and reconcile the actual working capital and net debt position against the estimated figures used at completion. This process can take 2–4 months, it is frequently contentious, and it routinely results in further price adjustments.
By this stage, the typical M&A advisory engagement has concluded. The advisor has been paid. The mid-market seller faces this final — and often significant — negotiation largely unsupported, relying on legal counsel who may lack the financial and commercial depth to push back effectively on a sophisticated buyer's accounting team. It is at precisely this moment that the earlier definitional ambiguities come back into focus, and unresolved points become leverage for the buyer.
How Deal Ascent approaches this differently
Deal Ascent is structured differently from a conventional M&A advisory practice. Our approach is built around four commitments that directly address the risks described above:
- Fees based on Equity Value only. We charge a 100% success fee — no retainer, no monthly billing — calculated solely on what the seller actually receives in Equity Value. Our incentives are directly aligned with your outcome, not an inflated headline number.
- Technical expertise across accounting and law. Our team operates at the intersection of M&A advisory, accounting, and legal drafting — a combination that is rare in the market. We do not simply negotiate commercial principles and hand the drafting to others. We engage directly in the legal documentation of financial definitions, financial schedules, locked-box and earn-out mechanics.
- Bridging the gap between advisors and lawyers. Most M&A advisors leave legal drafting to lawyers who may not fully understand the accounting implications. Most lawyers leave the financial definitions to advisors who may not appreciate the legal consequences of loose wording. Deal Ascent commands both disciplines simultaneously, ensuring that what is agreed in commercial negotiations is accurately and robustly captured in the transaction documents.
- Post-completion support as standard. Our engagement does not end at signing. We remain alongside sellers and their legal counsel through the completion accounts process, bringing the same financial and legal rigour to post-closing negotiations that we apply from day one.
For sellers — and for the lawyers advising them — this continuity of technical support materially reduces the risk of value erosion and legal dispute at every stage of the transaction.