value of bankers vs consultants for M&A?
I was reading the "Move to PE" thread and someone mentioned how PE guys can always hire bankers / consultants.
A lot of the top consultant firms have a M&A practice. Why would companies hire consultants over bankers for buyside and sellside M&A? what do they bring to the table and do they have a different role? would a company hire them mainly for buyside acquisition search and due dilligence work or because they aren't transactional fee based? do they have deeper relationships with c-level executives?
I know this might seem like a stream of questions but I think it could be something informative that hasn't been discussed yet. Thanks.
I asked about this in a consulting interview and from what I understand, bankers do the finance (modelling and financial structure) part of the m & a. They also pitch a lot of deals.
Consultants only do the work as far as getting things to work after the deal is done (actually realizing the bullshit synergies bankers claim in their models)- bankers don't deal with that at all b/c...well, b/c they're not consultants.
A question I want someone more knowledgeable to answer:
wtf do P/E guys at big firms do since they outsource all of what i'd think is the major work of P/E. Do they only arrange financing? I know mid-market firms undertake nearly all of the above steps themselves...
Consultants are usually attractive to PE firms for their operational/soft skills and industry knowledge. At a junior level, "deep relationships" with the c-level are pretty nonexistent regardless of where you work.
I'm not entirely sure what you mean by "buyside and sellside M&A." If you mean the M&A practice of a PE firm (ie. Blackstone), bankers have the upper-hand. Ibanks have traditionally driven the M&A practice with lawyers helping out in some capacity. But consultants are hardly found in that capacity, particularly when it comes to the skillsets a PE firm would be looking for.
M&A practices of consulting firms provide operational support during transactions, but that's really all I can think of.
In M&A, the banks are king.
I meant type of M&A deal. Are consultants favored / used more extensively by a company looking to buy or sell.
Buy. They are looking for ways to actually realize the synergies. The seller is just looking for an exit.
As has been mentioned, some consulting firms will work on the integration and operational aspects as the deal is being completed and afterwards.
Another role that consultants get hired for is performing top-line due diligence on a target company before a bid is placed. Consultants will build a market model to forecast the size of the market and the revenue forecast for the target firm. This will then be used in the model that a PE firm or bankers use to value the deal. The obvious reason for this is that otherwise, you're stuck using management forecasts, which aren't exactly impartial revenue forecasts.
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