Small and medium-sized businesses with an estimated value under $50 million may need to budget a notable amount for professional fees when preparing for a sale. The assistance of specialized advisors often strengthens the offer and safeguards the seller’s interests.
Costs fall into four main areas: tax, financial, legal, and additional charges. A description follows below.
Tax Advisory
Fees for tax planning commonly range from $6,000 to $30,000, depending on the complexity of the transaction, the number of jurisdictions involved, and the volume of assets. The involvement of an experienced professional typically streamlines the tax burden and anticipates potential liabilities, which can influence the financial result.
Preparations include an analysis of the company’s structure and the profile of its owners, including each owner’s residence, applicable taxes, and possible exemptions. In deals under $55 million, a review of accounting records and profit declarations is customary, aiming to avoid unexpected filings or additional levies. It is also advisable to confirm whether available credits or deductions can reduce the overall tax load.
Financial Advisory
The primary role of the financial advisor covers business valuation, identification of strategic buyers, and overall management of the sale. Two main fee structures are normally used: a retainer (monthly fee) and a success fee (percentage of the final purchase price). This percentage often ranges from 2% to 8%.
This service offers guidance in negotiations, review of corporate records, and methods for enhancing final sale value. The advisor helps to reduce delays or cancellations and promotes alignment between buyer and seller.
Duties go beyond determining a theoretical price by identifying potential buyers, assessing their financial capacity, and designing negotiation plans that highlight key aspects of the business. The retainer compensates the advisor’s ongoing support before the sale closes, while the success fee depends on transaction size and level of intricacy.
Legal Advisory
Review of contracts and regulatory compliance is handled by law firms focused on protecting the seller’s position. Fees tend to range from $25,000 to $125,000, through either flat rates or hourly billing.
Their role is useful in various phases:
- Letter of Intent (LOI): spotting clauses that could harm the seller.
- Due diligence: identifying employment, tax, intellectual property, and litigation issues.
- Contract negotiation: refining wording and verifying accepted obligations.
Legal counsel strengthens the transaction and lowers the chance of future disagreements. Early participation can clarify potential deal structures and how preliminary arrangements may affect the parties. During due diligence, the attorney examines corporate and labor documentation, licensing, required permits, and compliance with relevant authorities. In the final stage, a purchase agreement is prepared, outlining prices, responsibilities for hidden liabilities, and obligations regarding management continuity.
Other Expenses
This category includes notarial duties, filings in public registers, and certain transfer taxes. These amounts are generally not large, though a cash reserve is useful to avoid issues.
Common outlays include registration fees, notarial costs, and taxes on the sale of shares. Some jurisdictions impose a specialized levy on asset transfers, which may affect the total cost. Deals involving patents or trademarks may also incur charges related to changing ownership.
Spending on these items aims to maintain stability and protection throughout the sale. An advisory team with M&A experience coordinates the various segments and provides practical knowledge, which can reduce risk exposure.
Anyone looking to sell a company should remember that these expenses involve several elements that, when handled properly, help secure more advantageous closing terms. Close examination and the selection of qualified experts suited to the business, the applicable jurisdiction, and growth projections can guide the sale in an orderly manner with an increased chance of a favorable outcome.