Mergers and acquisitions (M&A) help companies cut costs, improve efficiency, and come out ahead in competitive markets. Still, they aren’t without their challenges.
While M&A is often a smart next step for growing a business, M&A transaction costs can affect financial success. From integration fees to sector-specific expenses, careful planning can mean the difference between a seamless merger and an operational headache.
In this guide, we’ll break down the standard M&A transaction fees you can expect to pay and what they cover. We’ll also explain how M&A integration savings often lead to better outcomes in the long run.
In this article:
- M&A Transaction Costs by Industry—And Integration Savings
- Frequently Asked Questions
- Final Thoughts: Turning Costs Into a Competitive Advantage
Standard M&A Transaction Costs
M&A transaction costs are simply a cost of doing business. Regardless of your industry, you can expect to pay fees like:
- Legal fees: M&A legal fees cover contract drafting, due diligence, regulatory compliance, and other legal processes. They often depend on the deal's complexity and can range from 0.5% to 3% of the deal value.
- Financial advisory services: Investment banks and financial advisors charge fees based on the size of the transaction, often calculated as a percentage of the deal value. These fees usually fall between 1% and 6% of the transaction.
- Due diligence costs: This process involves auditing a company’s finances, legal standing, operational health, and compliance. Due diligence can cost up to 1% of the transaction value.
- Filing fees: Regulatory fees are paid to government agencies. They vary depending on your industry and location.
- Integration costs: A post-integration checklist ensures your company maximizes operational efficiency, but there’s a cost to blending companies. Integration costs cover the fees associated with aligning systems, processes, and operations. For example, upgrading your IT system or consolidating your brand falls under integration costs.
M&A Transaction Costs by Industry—And Integration Savings
Deal complexity, location, regulations, and other factors have a big impact on M&A costs. From M&A fees by deal size to the cost of integration, understanding these expenses is critical for accurate budgeting and maximizing value.
Return on investment (ROI) differs greatly by industry, and it’s important to know what’s standard for your market. Learn more about typical M&A transaction costs and expected savings for integration in four sectors.
Telecom
In addition to legal fees, telecommunications M&A deals must also account for technology upgrades and aligning operational systems. For example, the anticipated merger of T-Mobile and US Cellular (valued at $4.4 billion) will involve upfront costs of consolidating the networks but it will offer T-Mobile a clear advantage against bigger players like AT&T.
However, some of the biggest M&A failures have happened in telecommunications. From the attempted acquisitions of America Online by Time Warner and Motorola by Google, telecom deals can easily fall through.
While telecommunications accounted for 17% of global M&A activity in 2023, strict regulations make this a tricky space. Given the telecommunications sector's tendency towards larger deals and complex integrations, M&A expenses in this industry fall on the higher end of average cost ranges, potentially closer to 4% to 7% of the deal value.
Social Media
Social media has unique M&A transaction costs and concerns. These platforms manage a lot of user data, and transactions are often very high-profile, gaining attention from regulators. That’s why monitoring legal requirements for social media transactions is crucial.
Integration costs in the social media industry can range from 2% to 6% of the deal value. Social media deals often include M&A transaction costs such as:
- Retainer fees of $50,000 to $500,000
- Success fees, which range from as high as 7% for small deals and 1% for mega deals over $1 billion
- Rebranding costs, which run $100,000 to $250,000
However, social media industry M&A integration savings are possible by unifying ad platforms, streamlining data storage, and combining user bases. This process can be complex and time-consuming, so creating a detailed timeline is crucial.
Software and Technology
Software and technology deals face substantial M&A transaction costs because of the complexity of technology integration, aligned product roadmaps, and merging teams.
For larger deals valued at more than $10 billion, transaction costs typically range from 1% to 4% of the deal value. However, for smaller and mid-sized deals, which are more common in the software sector, the total costs can be higher as a percentage of the deal value—sometimes as high as 10%.
Healthcare and Pharma
Regulatory compliance, clinical operations, and complex billing management systems make healthcare and pharmaceutical M&A transactions more complicated and expensive. For example, AbbVie acquired ImmunoGen in 2024 to bolster its cancer treatment portfolio in a massive $10.1 billion transaction.
In addition to typical expenses, businesses in pharma M&A can also expect to pay to unify electronic medical records (EMRs). Integration expenses in healthcare typically range between 4% and 9% of the deal value. However, some estimates put the number closer to 10% of target revenue.
There are several ways to see savings through integration, including:
- Visualizing and managing the post-merger integration framework
- Consolidating the supply chain
- Combining clinical capabilities
- Reducing technology and staffing redundancies
Frequently Asked Questions
What is the average cost of M&A integration?
The average cost of M&A integration typically ranges from 1% to 10% of the total deal value, depending on the industry. Technology and healthcare sectors often experience higher costs because of regulations and the complexity of combining platforms.
What is the 100-day plan for M&A integration?
A 100-day plan outlines the critical steps for successful M&A integration within the first three months post-close. This plan usually includes defining priorities, aligning leadership, identifying cost synergies, integrating systems, and establishing a communication strategy to minimize disruption and maximize value.
How can a merger lead to cost savings?
Mergers reduce costs by:
- Eliminating redundancies
- Optimizing operations
- Consolidating supply chains
- Leveraging economies of scale
What are the big mergers coming in 2025?
We expect several mergers to finalize in 2025, including:
- Swisscom’s acquisition of Vodafone Italia
- CPP Investment’s acquisition of Allete
- T-Mobile’s acquisition of US Cellular
- Capital One’s acquisition of Discover
What is the most successful merger of all time?
One of the most successful mergers in history is the Exxon-Mobil merger in 1999, valued at $81 billion. It created the world's largest energy company at the time and demonstrated how strategic integration could lead to industry dominance.
Final Thoughts: Turning Costs Into a Competitive Advantage
M&A transaction costs are part of the acquisition process. Understanding typical fees in your industry can help you better manage these expenses and create a stronger, more cost-effective entity after M&A. In fact, understanding these fees can help you identify M&A integration savings opportunities, offset the initial expenses, and realize long-term savings.
Managing M&A transaction costs doesn’t have to be overwhelming. Streamline due diligence, track expenses, and identify opportunities for M&A integration savings in one centralized platform with DealRoom. Request a DealRoom demo now to speed up integration plans by 3X.
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