Success Fees, Retainers & NCND Agreements in M&A, Explained

M&A has its own vocabulary of fees and agreements, and unclear terms cause most of the friction in a deal. Here's what a success fee, a retainer, and an NCND actually mean — in plain language.

1. What is a success fee?

A success fee is paid only when a transaction closes — it aligns the advisor with actually getting the deal done. It's typically a percentage of transaction value, often with a minimum and sometimes a cap. In some models the seller pays it; in an owner-friendly model, the buyer pays the success fee, leaving the seller's proceeds intact.

2. What is a retainer / preparation fee?

A retainer (or fixed preparation fee) covers the up-front work: valuation, CIM, teaser, and going to market. It funds the real cost of preparing a business properly, independent of outcome. A clear model separates this fixed preparation fee from the success fee.

3. What is an NCND agreement?

An NCND — Non-Circumvention, Non-Disclosure agreement — protects the intermediary and the target. It stops a buyer from taking an introduction and then going around the advisor to deal directly, and it binds them to confidentiality about the target's identity and information. It usually includes a non-circumvention period and a tail, so the fee is protected even if a deal closes later.

4. The rule that matters: full disclosure

FAQ

Who pays the success fee in an M&A deal?

It depends on the model. Traditionally the seller pays, but in some structures the buyer pays the success fee on closing, keeping the seller's deal value intact. It should always be disclosed to both sides in advance.

What does an NCND agreement protect against?

It prevents a buyer from bypassing the intermediary to deal directly with an introduced target, and binds the buyer to confidentiality about the target's identity and information.