When a business owner starts the M&A process to sell their company, they often rely on an M&A advisor, investment bank, or business broker. These professionals invest time, activate their buyer network, and use significant resources to maximize the chances of a successful business sale.
But what happens if you decide to withdraw your company from the market before completing the sale? This is where the walk-away fee (also called a withdrawal clause or interruption indemnity) comes into play.
What is the walk away fee?
In many M&A advisory agreements, a walk-away fee clause specifies that a minimum payment is due to the intermediary if the seller cancels the sale after the process has already progressed—especially if:
- The advisor has already mobilized substantial resources: prospecting, qualifying buyers, setting up a Data Room, organizing discussions, and more
- The seller, for their part, makes a unilateral decision to stop the process—sometimes for personal or strategic reasons or due to a change in context
Why is it justified?
The walk‑away fee does not seek to “guarantee success” but to protect the work actually carried out by the intermediary. It acknowledges the human and material investment already made, without pretending that a transaction took place when it did not.
It is a way to balance interests:
- the advisor does not bear alone the risk of an abrupt interruption
- the seller retains the freedom to end the process if necessary
Its primary purpose is therefore to compensate for the effort, time, and resources invested in the negotiations, as well as opportunity costs.
How should it be structured?
A walk‑away fee must remain reasonable and proportionate. It should also be capped and triggered only when objective criteria are met, such as:
- receipt of a formal offer
- the buyer’s access to the Data Room
- the signing of an LOI (Letter of Intent), etc.
In other words, it should not be perceived as a penalty, but as compensation for work undertaken.
How to calculate the walk away fee?
There is no universal amount: it depends on the nature of the transaction, how far the sale process has progressed, and the risks borne by each party. It should always be set judiciously so that it remains proportionate.
Typical factors influencing the amount include:
- The company’s value: the larger the company, the more resources the sale process consumes (audits, large data rooms, complex buyer universe).
- The intermediary’s costs and risks: team time, buyer search expenses, organization of negotiations
- Market dynamics: in tight markets where deals take longer and carry more risk, the amount may be slightly higher.
Setting a walk‑away fee is a delicate balance: it should protect the intermediary’s work without unduly limiting the seller’s freedom to stop the process. However, the walk-away fee should never approach the success fee, which is paid only if the sale is completed.
B2 Transmission’s approach
At B2 Transmission, we believe the withdrawal clause should always be:
- in justified cases
- at amounts well below the compensation provided in the event of success
- and always within a clear and transparent dialogue with the client
For us, the walk‑away fee is a tool of balance and mutual respect. It protects the work of the teams engaged in the process, without ever restricting the seller’s freedom to decide.
Final thoughts
A walk-away fee is not a punishment; it’s a fair compensation for work already done in an M&A sale process. Properly framed and explained, it helps secure the relationship between the seller and their M&A adviser and strengthens trust.