Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
April 30, 2024
9 Free Financial Modeling Lessons
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.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
Monkeys willing to work 100-week until this massive deal gets completed...?
Consortiums are formed to spread risk around
This applies more to loan syndication, when the lead bookrunner doesn't want to hold all the paper. In this case, the boutiques were brought in for advisory and anti-trust expertise. I doubt they will be holding any of the associated paper.
Companies will hire multiple advisors to give banks advisory credit. In return, banks will lower financing charges as acqusition financing tends to be very profitable. Its an incentive saying "hey we will charge you less for financing if you give us advisory credit so we can market around how we advised this deal". Most of the time, its usually one advisor that really helped with the strategy of the acqusition and the other banks can provide value in specific issues ie fairness opinions, etc.
Workerbee is spot on. It's industry politics.
agreed. additionally, it "keeps the other banks" honest. There's usually one bank that leads but it's helpful to get some other opinions, as workerbee mentioned. Additionally, big corps usually have relationships with multiple banks so it's helpful to spread the fees around.
Unless committed financing is involved, one investment bank can do 100% of the work (even with multiple bookrunners / advisors, the lead bank will always do most of the real work). Assuming the situation doesn't involve committed financing (and thus no need to spread risk), having multiple bookrunners / advisors serves two main functions from the company's perspective.
1) Market signaling - by having reputable banks associated with your deal (whether M&A or financing), you are telling the market that your numbers and analysis have been vetted by impartial third parties (not truly impartial, but I think you get my meaning)
2) Mouth feeding - Even though most deals only require one firm to execute, it is in a company's interest to retain multiple advisors / bookrunners in order to maximize the number of people thinking up M&A and financing ideas for you. By repeatedly selecting only one advisor or bookrunner, you are telling the market that you aren't interested in their ideas.
Pariatur minima in dolorem unde beatae inventore labore. Eaque illo repellendus et modi enim nam iure.
Eveniet iusto eos mollitia. In soluta vero et. Repellat architecto error sed aliquid nam. Nam minima mollitia aut est eos debitis id. Voluptas iste quo officia qui est voluptas quia beatae.
Ab et ex sequi et officia similique quos. Ut illo est et et sunt maiores. Nulla voluptatibus sequi qui architecto suscipit consequatur. Voluptatum et adipisci ipsam vero. Exercitationem architecto cum quod qui non. Et non sapiente iure voluptatem.
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...