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Realistically speaking your advice is what an elite boutique would advise whereas the bulge bracket would persuade to go with the deal regardless
hahah
This isn't true at all. If anything, the reverse could even be more likely to happen - the boutique needs those m&a fees to survive, whereas the BB could always just tell them to hold off on the sale for now and do a dividend recap instead, for instance.
Key word is "elite boutique" not "regular boutique". Elite boutiques have plenty of business coming in, you don't have to worry about them. On the other hand, a VP at a BB who is pressured to bring in fees to get that promotion to Director/MD or get laid off is going to be in one hell of a position to say "no".
It tends to be more rare, but it happens. We have done this twice and been burned once (re-opened process and attorney pushed for another IB).
Aside from a higher sale price (and success fee), another benefit is the increased likelihood of a close. Meaning, if you proactively address concerns that a buyer is going to have, you can improve the chances of a deal closing and get it closed quicker and with less time spent on it.
Thanks for the info. How closely might a sell-side advisory shop work with a client to turnaround their ops/sales/whatever for a period of time before seeking a deal?
Depends on the circumstance. In the MM, we worked w/a company closely (MD was present at all board meetings) in order to shore things up pre-sale. If the firm is truly a Trusted Advisor, there is going to be plenty of input from the IB. However, if the management team and board are incredibly skilled industry experts, the level of dependence on advice from the IB would be less.
Hahahah, all this BS about being "trusted advisors"
I've only been at a BB so that's all I can speak to, but I will say that there is ENORMOUS pressure for MD's to meet their numbers. We had monthly meetings where the only agenda was "close more deals!". Why do you think the MDs that are considered ballers, BSDs or whatever are the ones pulling in all the deals?
League table status is also incredibly important to BB's and senior management spend a ton of time doing whatever they can to push to be in x position at the end of the year.
Been in meetings with MD's where they've literally went "watch me call up this CEO and pitch him on an acquisition I have no fucking idea about. It's small enough so he'll bite. Need to make some fees here."
I've heard EB's are a bit better in the sense that they don't do as much pitching and can focus on advice, but this is absolutely not the case at any BB.
can relate
I saw it happen once in my group during 2 years at a BB. It was a smaller company - if a public co, large private, or division of a large company wants to sell, you're pitching to win that business. If a smaller company is looking for advice / alternatives, you may tell them to hold tight.
It makes sense to me that if a large company wants to divest a business unit, a sell-side advisor makes it happen ASAP regardless of market conditions or opportunity to improve valuation through op. efficiency or whatever. They've got the resources to take the hit, and even if they get a low price, the benefits for simply getting the divested unit off their books can be significant. I can't really get my head around doing this for a smaller company.
I've got a summer associate role lined up in M&A advisory this summer, and while I'm obviously motivated by the compensation, status, etc, I have always enjoyed being an 'Trusted Advisor' in whatever capacity. I've got my fingers crossed that the firm I'm joining has the scruples I'm accustomed to.
you're in for a rude surprise my friend
coffee is for closers
Maybe @"duffmt6" can also chime in, but in the middle market (particularly the lower MM), the goals are the same as they are at larger companies. But, the context and circumstances are different. Take 2012 for instance. The obvious thought process on the sell side was to help your client close by the end of the year to take advantage of the existing tax structure.
However, if you were advising a growth equity client on a recap for 70% of the shareholder's equity stake, it may have made sense to wait a few years before selling. Why? The increase in transaction value from the increase in EBITDA more than makes up for the tax advantages of 2012 vs. beyond.
Hey OP, just out of curiousity, what school do you attend?
Unlikely. In addition to what other people commented, that could also happen if your firm makes more money from the company on an ongoing basis than a potential M&A could bring in-house. But then it is unlikely, since debt work and overall corpfin housekeeping is much less profitable than M&A.
It's worth noting that, if you're hiring investment bankers to tell you to do nothing, you should be fired.
In a prescribed academic case, the conditions are different.
We are talking about a pitch situation, not an existing client. It doesn't cost money to get pitched by bankers.
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