On a sell side M&A deal, the client wants as high a price as possible....and the bank advising them wants as high a price as possible to boost their fee.
On a buy side M&A deal, the client wants as low a price as possible. Does the bank representing the buyer get a smaller fee if the size of the deal (price) is lower?
How are M&A groups advising a buyer incentivized to bring the price down?
| +167 | How to stop feeling like shit for not making it in IB? | 63 | 1h | |
| +121 | If Tik Tok is forced to sell, what banks do you think would be involved in the deal? | 59 | 9h | |
| +85 | Updated LA Banking Scene (2024) | 61 | 3h | |
| +40 | Ranking banks that went under | 24 | 5h | |
| +39 | Burnt Out M&A ASO | 20 | 5h | |
| +36 | Relevance of A-Levels for U.K. London recruiting | 25 | 3h | |
| +33 | A strategy for SA applicants late to the game like myself | 17 | 1h | |
| +27 | Series 79 Help / Tips to Pass The First Attempt | 11 | 2d | |
| +27 | Intern Ettiquette | 4 | 1d | |
| +23 | What are hours like at BBs in London? | 47 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Different banks do things differently and have a lot of different ways of making the fee structure align the incentives of both parties.
And even if that wasn't the case, any reputable bank would still be trying to get their client a great price. Clipping a slightly higher fee from a client instead of doing the best work for them is no way to build a good reputation as a banker, and everyone knows that.
They typically know a ballpark range of how much they could end up paying for the company as well as the complexities involved in the transaction before they start the process. From there, they agree on an advisory fee that isn't directly tied to the purchase price (i.e. not a certain percentage of EV paid or whatever).
That's been my experience, anyway.
Doloremque aut neque exercitationem. Molestiae cumque deserunt numquam praesentium perferendis repellendus.
Beatae quae minus deleniti rerum omnis sint omnis. Ea repellat aut voluptatem illum rerum. Distinctio iure laborum esse quia. Pariatur ab aut recusandae nihil.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...