Retainer

A retainer is an upfront fee paid to an M&A advisor or business broker at the start of an engagement, before any transaction closes. Retainers compensate the advisor for initial work — business preparation, valuation analysis, marketing materials, and buyer outreach — and signal the seller's commitment to the sale process.

In business brokerage, most of a broker's revenue comes from the commission at closing, though some brokers charge an upfront fee (for example for a Broker Opinion of Value) that is applied against the commission (IBBA, Your Guide to the Business Brokerage Profession, 2021). In M&A advisory, a work fee is more common: in a 2024–25 survey of 456 middle-market advisors (about half in North America), the most common monthly work fee was $5,000 to $10,000, and the most common fixed engagement fee was also $5,000 to $10,000 (Firmex, Global M&A Fee Guide 2024-25). Whether the retainer is credited against the success fee at closing depends on the agreement.

A retainer also functions as a pre-qualification mechanism: sellers who pay a retainer have made a financial commitment that signals seriousness, which motivates advisors to invest time in the engagement. An advisor willing to work without any retainer or minimum fee on a large transaction may signal a lack of confidence in the deal's completeness.

See also: Success Fee, Lehman Formula, M&A Advisor, Business Broker, Engagement Letter.