We don't run advisor processes. We build the pipelines that sit upstream of them — the scrapers, the scoring layers, the buyer-universe maps that a firm walks in with before any banker is hired. But part of the job is pulling public engagement letters and watching what gets disclosed in proxies and S-1s, because the fee schedule is the back page of the engagement letter and the most useful page in it. Everything before it is marketing. The fee structure tells you, in numbers, what the advisor is paid to optimize for over the next nine to fifteen months.
Here's the picture from that vantage. The deal isn't ours, but the language is consistent enough across hundreds of disclosed letters that the patterns are easy to read.
Retainers
Almost every middle-market sell-side engagement carries a retainer. It is usually monthly, sometimes paid as an upfront work fee, and in most engagements credited against the success fee at close. The number is small enough that no advisor of any standing is funded by retainers alone. It covers a fraction of the overhead and exists to do two other things.
The first is filtering. A founder who won't pay a monthly retainer is usually a founder who will pull out of a process at the first soft offer, and the advisor knows it. It's the cheapest possible signal that the seller is serious. The second is funding the work that happens before there is anything to be successful at: the CIM, the buyer list, the data-room build, the management presentations. None of that work has a success fee attached because none of it closes anything. Without a retainer, that work either does not happen or it gets done by the most junior person on the deal team, and you can usually see which by reading the CIM.
Success-only structures by deal size
Pure success-only shows up at the two ends of the size spectrum, almost never in the middle. On Main Street deals (sub-$2M businesses through traditional brokers) the broker takes a flat 8-12% commission and skips the retainer entirely. At the upper end, in bulge-bracket M&A, the bank waives the retainer because the success fee on a billion-dollar transaction is large enough that funding the deal team out of it is trivial.
Everywhere in between, roughly the $5M to $500M band where most PE buyers and middle-market sellers live, success-only is a flag. The advisor is new, hungry, or running a high-volume process where some percentage of engagements will not close and the math works across the book anyway. None of those are disqualifying. They are facts about the kind of attention the seller will get.
Lehman, Double Lehman, modified Lehman
The Lehman formula, originally a Lehman Brothers compensation schedule, got pulled into M&A because it had the right shape: a decelerator. 5% on the first million, 4% on the second, 3% on the third, 2% on the fourth, 1% on everything above. Largest percentage on the smallest slice.
What this pays for is closing. The advisor takes the bulk of the fee on the first few million dollars of enterprise value, and the marginal fee on the last incremental dollar of price is small. On a sub-$10M sale landing at $7M, the advisor's incentive between $4M and $7M is to lock the buyer, not push another bid out of them.
Most sellers do not see this in the document.
The Double Lehman doubles every tier (10/8/6/4/2). It is the modern default for Main Street and lower-middle-market brokers. Same shape, same incentive: close. The percentages are higher because the deals are smaller, and the absolute fee on a $3M sale at vanilla Lehman is not enough to fund a real process.
Modified Lehman variants (sometimes called Reverse Lehman, accelerator, tiered) flip the curve. The advisor earns a low percentage on the floor valuation and a higher percentage on every dollar above it. The structure looks like 1% up to $X, then 3% from $X to $Y, then 5% above $Y. Now the advisor's incentive at $7M on a deal floored at $5M is to push for $8M, because that incremental million is the most profitable million of the engagement.
The flip is rare in practice because advisors do not want it. It works when the seller has options: a clean asset, multiple inbound buyers, a thesis the advisor can't get elsewhere. It works badly when the floor is set sloppily, because the floor becomes the advisor's worst-case payout and they will defend it harder than they pursue the upside.
Hybrid and tiered, in practice
Most middle-market sell-side engagements ship as a hybrid: monthly retainer credited against close, plus a success fee that is either flat-percentage or a custom tier the advisor has negotiated dozens of times. The tier almost always includes some version of an accelerator above a stated number. The advisor learned at some point that without one, the seller assumes the advisor is paid to clear, not paid to push.
The thing to read inside a hybrid is the relationship between three numbers: the retainer, the floor at which success-fee acceleration kicks in, and the break-even price at which the deal pays the advisor more than walking away does. If the break-even sits well below the seller's expectation of price, the incentive to push is weak. If it sits above expectation, the advisor needs the seller to win for the advisor to win.
Buy-side mandates have their own shape: monthly retainer that is generally not credited, plus a closing fee in the low single digits of transaction value, sometimes with a target-discovery fee per qualified target introduced. The discovery fee is the one to read. It is the only part of the buy-side structure that pays the advisor for sourcing work, as distinct from execution work, and the rate at which it is set tells you how much of the advisor's time you are buying.
Accelerators and the sourcing question upstream
Two takeaways from reading a few hundred of these.
If you're the seller, the fee structure worth fighting for is a hybrid with a hard accelerator above an honest floor — Modified Lehman applied to a band the advisor agrees is reachable. Not a vanilla decelerator dressed up as a tier. The accelerator is the one structure where the last dollar of price is also the most profitable dollar for the advisor, and that is the only dollar the seller actually cares about.
The bigger thing, from where we sit, is that no common M&A advisor fee structure pays for buyer-universe coverage. The fee lands on the buyer who closes. The advisor isn't worse off for running a tight process against twelve buyers than a wide one against eighty, even though the wide one usually produces a better outcome for the seller.
When a firm has no independent map of who the credible buyers were six months before the LOI, the auction runs against whoever the advisor already knows. The buyer universe gets rented from the bank. A firm that has built its own sourcing layer walks into the advisor relationship with a coverage map in hand, a shortlist tuned to what they actually want to buy, and a candid view of which counterparties were serious well before anyone retained anyone. The advisor still runs the auction. The auction just runs against a list the firm helped build.
The fee schedule on page nine of the engagement letter sets the advisor's incentives. The buyer universe gets set somewhere else, much earlier, by someone else if the firm hasn't built it themselves.
