few questions about M&A and LBOs

1) in M&A the bank is a sort of advisor but i don't get exactly why the bank should be paid to provide said service
Sometimes you aren't paid unless you're the advisor on the merger or acquisition; a lot of times you'll do free M&A work since that means the firm will give you more equity/debt fees/is more favorable 2) aren't LBOs considered an acquisition? why are they located in a different department?
Firm-specific, hard to say - typically the financing/modeling will be done by the leveraged finance or M&A group, or even the industry group - really depends 3) shouldn't LBO be more of a buy side activity (i am thinking of PE here)?
You aren't actually buying the company as an investment bank - you're providing the capital/financing/some advisory 4) considering that both M&A and LBO grant you exposure to deals and business analysis, which one would you choose to start into if you had the choice? (some words on hours/pay/exit ops would be greatly appreciated!)

M&A

You call it M&A and leveraged finance, not M&A and LBOs. LBOs are a specific type of activity, whereas leveraged finance is broader.

CrazyAnalyst122:

in the last weeks i've tried to cover my understanding of the AM buyside but i had to face a simple reality: getting my place through the door of even an mid-top AM firm (in a equity/credit analyst) is close to impossible as a MSF student from a mid-top tier school (europe). that said i've been exploring the IB sector which scared me because of the crazy hours even if almost everyone considers it a sort fo milestone that boots your CV considerably especially if you manage to get into a BB bank. still i was a little confused on M&A and LBOs:

1) in M&A the bank is a sort of advisor but i don't get exactly why the bank should be paid to provide said service
2) aren't LBOs considered an acquisition? why are they located in a different department?
3) shouldn't LBO be more of a buy side activity (i am thinking of PE here)?
4) considering that both M&A and LBO grant you exposure to deals and business analysis, which one would you choose to start into if you had the choice? (some words on hours/pay/exit ops would be greatly appreciated!)

i know that to many users of this forum all these questions seem rather obvious but i am not yet in the industry and before i network i want to make sure i know what i might be signing up for (hence approaching and asking the right questions)

thank you for you time!

Let me start by saying, keep at it. But, if you think breaking into IB is any easier than AM, you are sorely mistaken. If your MSF is quant-heavy, AM gives you a much better chance.

1) The bank is paid to advise either the buyer or seller on a transaction. The bank provides negotiation, valuation, and a process that either helps the buyer find an ideal target or helps the seller find an ideal buyer. The fee paid is a success fee, so the bank's incentives are aligned with those of the party it is representing.

2) LBOs are considered an acquisition and often are NOT in a separate department. M&A groups work on LBOs and strategic acquisitions (companies buying other companies). In an LBO, the buyer is typically a financial sponsor (i.e. Private Equity Group or Hedge Fund). The M&A group may work with the DCM or LevFin groups to get pricing for the transaction.

3) The LBO can be a buy side activity if the bank is advising the BUYER. If the bank is advising the seller, just as the name indicates, it is a sell side activity.

4) Again, M&A and LBO go together. There are nuances within different banks (i.e. industry groups that conduct M&A instead of pure play M&A teams), but generally speaking an LBO is a form of acquisition.