Sell-Side Advisory
Sell-side advisory is the work an investment bank or M&A boutique does for the owners of a company that is being sold: preparing the business and the materials, building the buyer list, running the auction or the negotiation, managing diligence, and negotiating the price and the terms to signing. The adviser's job is to find the buyer who will pay the most and close, and its fee is a percentage of what that buyer pays.
- Also known as
- Sell-side adviser, Sell-side M&A advisory, Exit advisory
- Used at
- sales of companies from a few million of revenue upward; below that, brokers and platforms; at the top, the global banks
- Binding
- an engagement letter with a scope, a retainer, a success fee, a tail (the fee is owed if the company sells to a buyer the adviser introduced within 12–24 months of the engagement ending) and often exclusivity for the adviser
- Typical fee
- 1–3% of enterprise value for mid-market deals, with a minimum fee of €300,000–1m and a ratchet paying a higher percentage above a target price; retainers of €10,000–40,000 a month credited against it
- Typical scope
- readiness review; vendor due diligence coordination; teaser, information memorandum, financial model, data room; buyer list; process letters and timetable; managing indicative and binding offers; negotiation of heads and the sale agreement alongside the lawyers; managing the buyer through regulatory approval to completion
- Parties
- the selling shareholders (the client), the company's management (who present the business), the adviser, and the buyers and their advisers on the other side
How sell-side advisory works in practice
The engagement starts before the sale does. The adviser reads the business as a buyer would: which numbers need cleaning, which contracts need fixing, which customer concentration needs explaining, whether the licence is in good standing. It commissions vendor due diligence if the deal warrants it, builds the model and the memorandum, and assembles the data room. Then it designs the process — auction or bilateral, wide or narrow, which buyers — and runs it: teasers, NDAs, memoranda, indicative offers, a shortlist, management presentations, binding offers, exclusivity, signing. Throughout, it is the seller's negotiator and the buffer between the buyers and a management team that has a business to run.
What the seller pays for is price and certainty. A well-run process typically adds 10–20% to the price a bilateral approach would have produced, through competition and through terms set by comparison; it also produces a signed deal rather than a negotiation that drifts. The adviser's incentive is aligned on price and slightly misaligned on timing — it is paid on completion — which is why sellers negotiate the ratchet (a higher percentage above a target, so the adviser's interest is the last euro) and the tail (so the adviser is paid for the buyer it found, not for the one who appears a week after the engagement ends).
For fintech founders the adviser's regulatory experience matters as much as its buyer list: a process that puts the change-of-control question to bidders at the indicative stage closes; one that discovers it at signing does not.
Example
The founders of a payments company with €6m of EBITDA engage a boutique: €20,000 a month, 1.5% of enterprise value with a €400,000 minimum, 3% on any value above €50m, an 18-month tail. Readiness review and vendor due diligence take ten weeks and fix a safeguarding reconciliation the buyers would have found. The process reaches 52 buyers, produces six indicative offers and three binding ones, and signs at €56m — against the €42m a partner bank had offered bilaterally the year before. The fee: 1.5% of €50m plus 3% of €6m, €930,000, plus €120,000 of retainers not credited beyond the minimum — about €1.05m. The founders paid 1.9% of the price for €14m more than they had been offered without a process, and a buyer whose regulatory application had been drafted before the binding offers came in.
Common mistakes
- Engaging an adviser after a buyer has already made an offer, so the process is a negotiation with an audience. - A fee with no ratchet, which pays the adviser the same for €50m and for €56m. - A tail so long or so wide that a buyer the founders met at a conference costs them 1.5%. - Advisers chosen for the highest valuation in the pitch, which is a sales technique, not a forecast. - Management left to run the process and the business at once, so both suffer and the numbers fall during the auction.