Value of Boutique M&A Experience
How valuable would experience working at a tiny boutique on M&A deals primarily in the $5-$10M range be? Since the deals are quite small the valuation is pretty straight forward, usually just use some prior transaction multiples to get an idea of what a company should be selling for but in reality its kind of a whatever the highest price a buyer is willing to pay situation. Obviously not expecting to be able to jump to a BB firm afterwards but was hoping I'd be able transfer to a larger boutique in the future. I'm a recent grad so this isn't a summer internship.
How is it that you think BB M&A deals work that differs meaningfully from this?
Not sure since I don't really have anything to compare to but: i do basically no modelling work, less complicated due diligence issues (not sure about this?) and we don't have access to Bloomberg, Thomson One or FactSet or any other sort of databases that even a larger boutique would have.
Are you saying larger deals aren't that different from lower-MM?
DD in big deals is often much less in-depth than the DD performed on MM deals, since large companies have many layers of oversight already built in (auditors, counsel, shareholders, SEC, etc.).
I'm not trivializing BB work by any means, if you're not doing any modeling right now, then perhaps your experience would change more dramatically than I had thought. However, at the end of the day, most deals are made using multiples, doesn't matter the size of the company.
shit gets cray when them deals get big, bro!
I am surprised that bankers are even brought on for a 5-10m deal. Seems unnecessary.
If you're looking to sell your $10mm business, are you just going to start cold calling rich people?
I feel as if deals of this size would mostly be strategic deals by other small cap to mm companies, and that the owner, operator, etc. would have the industry expertise to know who to call on their own. Just saying I was surprised, not questioning its existence -- sorry if I sounded like a douche
Possibly.
In all seriousness, sounds like the OP works more for a business broker. $5 to $10mm isn't even a MM deal IMO. There are M&A advisors for the lower-middle market, but the value add evaporates once you get lower than say $3mm EBITDA IMO.
OP, in order to move up to a legit MM boutique of any size, you need to learn how to model and understand the deal process better. Are you FT or interning there?
Daeg, you'll get more informal training and less face time as you would in BB.
These types of deals happen frequently as they facilitate Series B, C rounds and eventual cross-P/E sales as the business gets larger. The experience is quite helpful if you want to stick to the start-up route. If you look at west-coast based companies like Arbor, you'll notice these guys work on relatively small deals, and choose to work at start-ups before moving to merchant banking. That route isn't guaranteed, but the experience is certainly valuable despite it being considerably different than what a traditional MM/BB/EB does.
Concern about this model, however, is you'll need to consistently source deals to maintain decent pay so a ton of the time, you'll see junior roles cold-calling and sourcing potential clients. It's similar to very very low-market P/E in that sense though you're not taking an investment role.
I've worked/had experience in this stuff prior to moving to BB. Disclaimer to my comments, however, is that at these small sizes, adviser structures and sourcing habits can vary significantly.
From the sound of it, OP isn't working with VC firms necessarily. There are thousands of small $500K to $3mm EBITDA cos.
Isn't there another name for this kind of advisory? I'm guessing it's mostly stuff like mom and pop stores and restaurants right?
What kinds of restaurants do you know that are pulling in $3mm+ EBITDA?
I already said it, business brokerage.
You will learn to put together a deal with inadequate controls, management, and structure. We have had the one off deal fall below $10 million and it comes back to bite the firm every time. The deals take too much work and time for the small $300 thousand fee. If the range is truly $5 to $10 million, keep looking for something else. If you have no other options... welcome to the weeds.
Karlsson - Do you have any idea on the firms fee structure? Is the firm registered with FINRA? Business Brokers usually structure the deal as an asset deal or a real estate deal. Will you be taking the Series 79 & 63? This will tell you if it is a business broker. Let me know.
Associate_MA123: Nope haven't heard of having to take Series 79 or 63, but I'm in Canada so I'm not sure if that makes a difference? Fee structure is generally 4-5% with a 5k/month retainer from what I've seen.
peinvestor: Definitely doesn't sound like this firm then.
You should be fine. The fee structure kind of worries me... $460k...
Wow, those retainers are quite low and the fees are higher than ours. Definitely going "all-in". Just hope the group continues to close transactions.
I interned at a place like this for my sophomore year internship. Leveraged this experience to get an offer from a top middle market bank as a junior SA this upcoming summer.
They focused mostly on growth funding for start-up companies ($5-$30 million or so) using equity private placements. Although it was small cap, people definitely considered my experience as 'actual' investment banking, even if it was extremely small cap.
Encouraging to hear but I think my circumstances are probably a little worse off than yours were...
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