Hi all - could anyone provide some insight into how much investment banks actually generate in fees from an average sized LBO (Think a deal size of c.$2.0bn). I know we would have to take into account underwriting fees, actual advisory fees, closing fees, etc. Thanks in advance!
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~$10 - $25mm for a sell-side fee
Assume no meaningful buyside fee
Assume $1.0bn of debt on a $2.0 bn TEV @ 2.25% = $22.5mm
= ~$30-50mm for everyone involved
Not to get too technical but hard to imagine any buyouts with 50% debt / 50% equity in this credit market, maybe 1/3rd at best
But yes $30-50m sounds about right
Depends on what kind of business you're talking about, but if it trades in the double digits, you're right
Lot wrong with your post:
1) a 50% LTV business isn’t rare, even today
2) all that matters for fees is quantum, not leverage. $1bn in total debt for a LBO is not uncommon
This feels largely right, but would emphasize the sell side fee is highly variable dependent on outcome and how the fee is structured.
Company expecting $1.5B and sells for $2B? The sell-side bank can make $40M+. Expecting $2.5B and sells for $2B? Bank is probably closer to the $10M side of things. Obviously all depends on the ratchet structure, but just want to emphasize the sell side fee is highly dependent on outcome
what % of the 10-25m sell-side fee would the lead banker get compared to the other banks on the deal (all representing the sell-side)
In most cases, there’s going to be a single M&A advisor on the sellside (unless you’re talking about having one doing the main M&A assignment and one doing a fairness opinion or something like that) - in which case, the main bank will earn the vast majority.
If you do have 2 banks genuinely co-advising on the sell-side, I’d guess the fee split is anywhere from 75/25 to 50/50.
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