M&A Advisory — Monthly Retainer Fee (Deferred and Applied Against Success Fee)

💡 Accountant's Note

Many M&A mandates include a monthly retainer ($100K–$500K/month for large deals) paid by the client during the engagement period. The retainer has two purposes: (1) compensate the bank for advisory work if the deal doesn't close, and (2) reduce the success fee payable at closing (most engagement letters credit retainers against the success fee). Under ASC 606, if the retainer is a separate performance obligation (advisory services regardless of outcome), it's recognized as earned each month. If it's purely an advance against the success fee (refunded or credited at close), it's deferred. Most engagement letters fall somewhere between — practical treatment: defer retainers until the earlier of (a) deal closing (apply against success fee) or (b) deal termination (recognize as the fee earned for work performed).