How is deal work split between co-advisors?
Never really thought to ask this, but was just reading the RockTenn-MeadWestvaco $16bn merger deal book article. The listed advisors were:
RockTenn - Blackstone, Lazard
MeadWestvaco - BAML, GS, Greenhill
In terms of responsibility / deal work how would this usually be split up? Would models be shared across firms? I'm guessing financing is being provided by BAML, and thus was given advisor credit?
Is it also safe to assume that any deal where both a BB and boutique are hired, the boutique will be guaranteed to do at least some of the heavy lifting analytical work (due to lack of financing capability)? Kind of hard to say between Blackstone and Lazard though.
Greenhill did all the work, but everyone reaps the same fees.
On this particular deal, it is important to differentiate between advisors to the Company and advisors to the Board. From the transaction press release, you'll see that it says:
"Blackstone Advisory Partners L.P. served as financial adviser to RockTenn in the transaction and provided its board of directors a fairness opinion. Lazard has also provided a fairness opinion to RockTenn’s board of directors, as well as advice to the Company on certain matters related to the transaction.
MWV’s financial advisers were BofA Merrill Lynch and Goldman, Sachs & Co. Greenhill has also provided a fairness opinion to MWV’s board of directors."
While the distinction is very slight, it would seem to suggest that Blackstone was RockTenn's primary financial advisor, while Lazard's main role was primarily to provide a fairness opinion to RockTenn's Board. Similarly, it would suggest that BAML and Goldman were MWV's primary financial advisors, while Greenhill's main role was to provide a fairness opinion. Independent advisors (often the elite boutiques a la Lazard and Greenhill) are brought on to lend an independent voice to verify a transaction's fairness right before announcement, as their opinions are not biased by any lending or financing relationships with the companies.
While Blackstone, BAML and Goldman likely worked on the deal for several months, Lazard and Greenhill could have prepared their fairness opinions in as little as a week. Fees on fairness opinions, while still significant for the amount of time invested by the banks, are multiple times lower than fees for lead financial advisory roles.
More generally, each transaction is different, but this dynamic differentiating between primary advisor to the Company vs. fairness opinion provider to the Board (and potentially vs. financing provider / financing advisor) is quite common on large deals.
^Appreciate the help. SBed.
Seemed like a big win for Blackstone. Haven't seen them on any transaction of this size recently (or maybe ever).
This deal does make it seem like that at least a large part of the work given to boutiques are fairness opinions though. Which would make sense due to their unbiased opinion. And thus maybe a large part of the league table credits they are given come from these fairness opinions.
Fairness opinions are the spawn of satan. Nothing like having a week of solid grinding for MDs worried about getting sued.
In reality it looks something like:
Teams from both banks get on a call to discuss what each team will contribute to say a CIM. Each MD wants to ensure that their opinion is heard loud and clear and that they are providing their own 'value add'.
Thus the analayts/associates are frivously taking notes about the extra 30 slides they now have to make because the MDs at each bank keep trying to one-up each other.
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