Does anyone else feel we are working as a free consultant?
Taking NDA, EL, conflict check, timetable, VDR / Q&A management type of real M&A execution work aside.
Does anyone else feel the job has very little to do with what WSO or BIWS portrayed as IBD?
Clients often come up with tasks that belongs to CDD / FDD / legal advisors. For example:
- Pricing or market sizing which we tbh have very little visibility even leveraging those third party databases
- Who are the companies along the production chain and what is SoW and cost structure (we can do desktop research but tbh just pay a few k USD to do an expert call or get McK to do it man, our answer is no different from out of a business major freshman project)
- Tax implication of XYZ transaction structure (seriously we can show you some precedent crap or our desktop understanding, but you should get a tax advisor for your own benefit, just like you don't seek health advice from bankers)
- Legal considerations for XYZ (same man, we don't provide legal advice, just get Cravath to cover your ass ffs)
- Views on structuring EBITDA (this we could take it but FDD is cheap and they will give you 80 pages of report, why us?)
I am not very against doing these types of stuff but I seriously believe the output from us on these matters are mickey mouse tier at best. And a serious client should not rely on us to provide such advice. We should stand by them to help grilling these advisors and leave no stone unturned, not providing half baked advice.
It just appears to me some clients are cheap ass and think bankers can help them answer specialized questions by googling. The worst part is probably the ramp up process when the client starts be serious and onboard MBB / big law. Now everyone has to redo the bs analysis. Burning lawyers' mid night oil and spending bankers time to provide tax or legal advice just because no deal no fee. Ffs
Matt Levine says it best:
"The basic model of financial advisory work is that you never charge clients the correct value of the work. You do lots of quite substantive work for free: You come to them with good ideas for mergers and financings and restructurings, you give them frequent market updates, you bring in a robot economist to answer their economics questions and a tax specialist to help them with thorny tax problems, you help them with their financial modeling, you recommend good people for jobs at the company, and you never send them a bill for any of it. Then one day they do a merger and you send them a bill for $30 million. You understand, they understand, everyone understands that the $30 million isn’t just for the work you did on the merger. It’s the payoff for the whole relationship."
This is it. I refer to it as "marinating a client"
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