Why do IB deals usually have so many banks staffed on them?
Sorry for the potentially dumb question here, but I'm just starting to learn more about IB and don't understand this. On any big IPO, it seems like every single BB and a few boutiques are advising on the deal, and even on smaller deals you will usually see one or two BBs and a handful of boutiques.
Why is it necessary to have so many banks working on these deals? Isn't it a total waste of the company's money to pay for fees to all these banks? Are the banks doing redundant work (ie are they all building the same models) or are the responsibilities split up? Do the competing banks work together when they are on the same deal?
Company doesn't pay more fees, the fixed % fee is split between the bookrunners Also, it is usually good for the company to have more banks to do the IPO
Syndicated loans is a big part of it. Spreads the risk across banks instead of one bank being on the hook for a massive loan
I understand it more in the context of an IPO when you want more bank's balance sheets involved, but why is it necessary for M&A also? Ie let's say a PE firm is buying a company for $1B, why would they need UBS + Jefferies + Blair + random other boutiques (and I just saw a deal announced that looked just like this).
League table credits, or a MD leaving the firm and bringing to his/her new firm
In the PE case, the banks on the long list typically will provide the financing too.
To add on to this, for the situations where the banks providing acquisition financing are added as advisors, this is often times on a no-fee basis. Instead it is a way for the banks to count the deal toward their M&A league table credit
Also is a way to maintain relationships with certain banks. Sometimes companies will throw them a bone and let them be co-advisors on a deal just to satisfy them and keep the relationship.
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