What is the fee for broking a merger or acquisition?
March 27, 2020
by a professional from The University of Chicago - Booth School of Business in Rye, NY, USA
Making introductions to two CEOs. I believe in a great opportunity to combine the two businesses.
I can also help with the due diligence and post merger integration.
Any hint on what I can ask and how I should proceed?
from The University of Michigan in Detroit, MI, USA
Middle market investment bankers typically take###-###-#### % of the EV depending on the size of the deal (not sure how this plays out with brokers in the micro middle market). In order to justify this fee, the bankers conduct full premarket diligence, create extremely extensive marketing documents (CIMs), organize and present the raw client financials, identify potential buyers (typically a list of 100+), conduct buyer outreach, coordinate buyer communication, manage and organize virtual data room, negotiate LOIs and coordinate all third party diligence. On the buy-side its a very similar process just replace the word "buyer" with "target company". The main role of the banker is the bring the right buyer/seller to the table with prices and terms that maximize your client's objectives. Diligence coordination is a very small part of what a banker gets paid to do.
However, there are definitely scenarios where a buyer/seller is already at the table and a client hires a bank to facilitate the diligence process. Since much of the work that a banker would do is not necessary, the fee usually goes down by a significant amount but is still based off the final EV of the transaction. In all cases, the bank works for one side of the transaction not both. I've personally never seen an investment bank take on integration work post-deal...this would only be the case if the particular bank offers/markets additional consulting services.
So circulating back to the main question, I would go to the CEO that you're closer with and propose an hourly rate or consultative fixed fee structure as opposed to a transaction fee (like an investment bank would do).
Hope that helps!
from The University of Michigan in Detroit, MI, USA
Further, there looks to be state by state exemptions for smaller deals regardless of deal structure (I'm not too familiar with these). I've attached a helpful link that summarizes regulations. Slides###-###-#### talk about the exemptions.
https://secureservercdn.net/###-###-#### /67g.5ed.myftpupload.com/wp-content/uploads/2019/05/BIEF-CFC-Update###-###-#### pdf?time=###-###-####
-Phil