Conflict of interest on buy side M&A deals?
On a sell side M&A deal, the client wants as high a price as possible....and the bank advising them wants as high a price as possible to boost their fee.
On a buy side M&A deal, the client wants as low a price as possible. Does the bank representing the buyer get a smaller fee if the size of the deal (price) is lower?
How are M&A groups advising a buyer incentivized to bring the price down?
Different banks do things differently and have a lot of different ways of making the fee structure align the incentives of both parties.
And even if that wasn't the case, any reputable bank would still be trying to get their client a great price. Clipping a slightly higher fee from a client instead of doing the best work for them is no way to build a good reputation as a banker, and everyone knows that.
They typically know a ballpark range of how much they could end up paying for the company as well as the complexities involved in the transaction before they start the process. From there, they agree on an advisory fee that isn't directly tied to the purchase price (i.e. not a certain percentage of EV paid or whatever).
That's been my experience, anyway.
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