Only partly. A deal platform that charges a success fee gets paid when you buy a company, so it wants you to buy. But a buyer does well by buying the right company at the right price, and that means saying no to almost every deal you see. On a $5 million purchase, Axial's fee is $150,000 if you buy and nothing if you walk away.
"We win when you win"
Axial says this on its buyer page. Buyers pay no subscription. When you buy a company you first found on Axial, you pay a fee based on the price: 5% of the first $1 million, 4% of the second million, 3% of the third, 2% of the fourth, and 1% of everything above $4 million. This is called the Lehman scale. A $5 million purchase costs $150,000 in fees, and a $10 million purchase costs $200,000.
The line is true. Axial gets paid when you buy. But buying a company is only good for you when it is the right company at the right price, and the fee is the same either way.
When a success fee works
Sellers pay their M&A advisors the same kind of fee, and for them it works well. The seller and the advisor both want the company sold, and both want the highest price. When the advisor gets a better offer, the seller keeps most of the extra money and the advisor earns a small part of it.
For a buyer, both of those change. You want a lower price, but the fee goes up a little when the price goes up. And a seller who hires an advisor has already decided to sell, while a buyer looking at deals should turn down nearly all of them.
What happens when pay depends on a sale
Economists Steven Levitt and Chad Syverson compared houses that real estate agents sold for clients with houses the agents sold for themselves. In their study, the agents' own houses sold for about 3.7% more and stayed on the market about 9.5 days longer. On a client's house, $10,000 more in price might earn the agent $150, while any sale earns the full commission. The authors say this is why agents push clients to sell sooner and for less.
A deal platform does not negotiate your price, so it cannot push you the way an agent can push a seller. Instead, the effect shows in how the platform makes money. It earns more when more buyers buy, so it wants to show more deals to more buyers. It earns nothing for the hours you spend reading a deal and deciding no.
This does not make a platform dishonest. It means you pay for a purchase, and a purchase is only good for you when the deal is good.
Two more costs of the fee
The fee depends on where you first saw a deal. So buyers keep notes on when each deal reached them and who sent it, in case the platform says it showed them the deal first. That work protects you, but it is time spent on the fee, not on the company.
You also pay the fee at closing, after months of checking the business, legal bills, and arranging a loan. By then you will not put the deal at risk over an argument about the fee, so you pay it.
The case for a success fee
A subscription has a real cost too. You pay it every month, even in months when you buy nothing. The fair case for a success fee is that it costs nothing if the platform never finds you the company you buy.
A subscription also has to earn its place every month. If the deals stop matching what you want to buy, you cancel and stop paying. Here is the math on one $5 million purchase.
| On one $5 million purchase | Success fee | $299 a month subscription |
|---|---|---|
| You buy it | $150,000 | $3,588 a year |
| You pay $500,000 more | $155,000 | $3,588 a year |
| You walk away | $0 | $3,588 a year |
One $150,000 fee equals about 42 years of a $299 monthly subscription.
If you buy rarely and have no budget for tools, a success fee is a fair way to pay, as long as you add it to your numbers before you sign a letter of intent. If you read new deals every week, the success fee pays for the one purchase and nothing for the weekly reading, which is where most of your time goes. See what each deal source charges and the best Axial alternatives for buyers.
Where PrivSource fits
PrivSource charges buyers $299 a month and never charges a success fee. Our AI sourcing agent searches broker, M&A advisor, and banker websites for deals that fit what you want to buy, and advisors also send us deals that are not posted anywhere. Each deal comes with why it may fit and where it may not. Telling us what you want to buy is free, and if the deals stop fitting, you cancel. Apply for buy-side access.
