Revisiting the prospects of M&A work
http://www.wallstreetoasis.com/forums/as-the-ma-c…
I’ve raised a question regarding M&A prospects in the near future, and I thought when the market is bullish, M&A will be going gangbusters. On the other side, when the market is bearish(I wouldn’t call this current market situation bearish though..I’d describe it as toilet shit floating around the whole market)restructuring and strategic advisory work will increase. And I agree with all of the guys who posted their opinion about this issue at the above thread.
But, I personally think there will be a big change in the near future. The force of the first big change in the past was due to the highly growing competition of the industry. Entry barriers of advisory are not that high, and if you had good track record and proprietary information to conduct the deal successfully, you were on the leading edge. But, considering the tenuous nature of the industry, lots of things changed. It became more like an exclusive sale these days, and competition to win a deal became fierce. I think one of the fundamental reason of the crisis stems from here. The valuation was unreasonable and many corporations took them at a cheap price. But this business is not commodity. I think this whole miserable event occurred when the corporations thought the investment bankers job shared near 100% similarity to commodity.
I think there will be a second big change in the industry. And this time it’s not because of competition. This time it’s due to market reaction. When every time there’s a big meltdown or debacle there is market reaction. I really don’t want to put government regulation in the market side, but if it does something on the behalf of the market participants, whether or not it works in a good way or a bad way, it should also be considered as a market reaction.
We have to admit that I-bankers job until now in the M&A side was not that rewarding to the whole economy if you look at the result. Most of the deals were turned over. Although it might not share a lot of portion to the whole mess right now, the nature is the same. Somebody earned disproportionate share of money without creating economic value added!
Regulatory bodies will throw on some strict measures and corporations will think more thoroughly to align the potential deals with their long term value.
I guess it’s time to change our way of working, or we will be a sunken boat with “once hubris” name tag attached.
