What fees are payable on a business purchase?

What fees are payable on a business purchase?

There are a number of types of fee payable on a purchase transaction, which can include:

• Corporate finance
• Legal support
• Due diligence
• Accountancy
• Taxation
• IFA / Pension specialists
• Funders arrangement fees

Fees are usually rolled into the transaction costs and included in the total amount of funding sought to complete the purchase.

The private buyer is not expected to fund the costs of the deal “out of their own pocket” as such.

Practically speaking, the buyer will be introducing private capital to the deal along with the capital from the funder at the point of completion. Out of the combined “pot” of capital, costs of the transaction will be settled to the various parties along with the agreed completion date payment to the sellers. These items will be summarised in a Sources and Applications Statement which will simplistically look something like the example below:

What level of fees does each party charge?

• Deal origination – normally a percentage of the deal value or a fixed fee to undertake this specialist research necessary to source an acquisition
• Corporate finance support – could be between 3% and 5% of the transaction value
• Accountancy fees – could easily be between £3,000-£5,000
• Taxation advice – could easily be between £2,000 – £5,000
• Due diligence – likely to be between £10,000 and £20,000
• Legal fees – likely to be between £15,000 and £25,000
• IFA advice – typically a bespoke charge on a case by case basis
• Funding arrangement fees – normally 0.5% – 1.5% of the funding arranged

Subject to the size of deal and whether you use a corporate financier or not, the total of these could easily come to between £100,000 and £150,000. A buyer should probably budget for £200,000 inclusive, as a conservative figure.