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Interesting… now the question arises: is buyside advisory service necessary for M&A transactions and is it worth the price?

Open for discussion….

Just to share with you my own experience, our company had done couple deals successfully in the past two years without using investment bankers and relied solely on our lawyers, knowledgeable senior management team and strong internal corporate finance staff.

I guess to answer this question, the following key factors must be taking into consideration:
1) complexity & size of the transaction
2) knowledge and capability of senior management team and in-house corporate finance staff
3) reliance on investment bankers for strategic advice
4) value added by ibankers in the whole process

These are just my personal opinions,说错了请各位DX手下留情,少扔几块板砖,尤其是雷蒙同学。: )
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Replies, comments and Discussions:

  • An interesting discussion on engagement fee structure for buyside advisory service.
    本文发表在 rolia.net 枫下论坛One boss just came out of a conference call and he started to discuss how the engagement letter should be termed when advising buyside. As most of people knows, M&A advisory fees are normally a percentage of transaction value. (it could be either equity value or enterprise value with specified adjustments). In this case, it is based on equity value of the company being acquired. The interesting thing is that our fees got increased because the additional restricted shares (which is part of the target's defence protection against undesired take-over) warded to senior management/board members were finally approved in yesterday's shareholder meeting.

    The point is whether it makes sense to base fees on transaction value while you are acting for the buy side as your responsibililty is to minimize the purchase price for the buyer. There is obvious conflict here. Or the fee should be set at target level subject to potential increase by achieving lower price. However, most engagement letters are not drafted this way. Higher price, higher fee.

    This reminds me of real estate agent contract which works in a very similar way.更多精彩文章及讨论,请光临枫下论坛 rolia.net
    • Slight difference with real estate but critical effect.
      1. The real estate agency fee is dealt individually while the buyside in the investment industry is normally in bulk.
      2. The principal of real estate transaction is the final decision maker while the brokers/portfolio manager in investment make decision on behalf of the investor.
      • I think the LZ is talking about the M&A transaction advisory, rather Investment Management advisory.
        • You're right this time. My appology for not understanding correctly.
          But in that case, the M&A transaction value is more based on equity, which is not a discretionary number that the acquirer's advisor can make it up. It's even less comparable with the real estate agency case.
          • 一看就没诚意嘛!故意把apology 打成appology 想蒙混过关。
            • 你狠!我甘拜下风。
              • 承让,承让。
    • yeah...so we should buy new house w/o using agent, then later hire an agent for selling
    • To my humble opinion, I don't see conflict here.
    • Interesting… now the question arises: is buyside advisory service necessary for M&A transactions and is it worth the price?
      Open for discussion….

      Just to share with you my own experience, our company had done couple deals successfully in the past two years without using investment bankers and relied solely on our lawyers, knowledgeable senior management team and strong internal corporate finance staff.

      I guess to answer this question, the following key factors must be taking into consideration:
      1) complexity & size of the transaction
      2) knowledge and capability of senior management team and in-house corporate finance staff
      3) reliance on investment bankers for strategic advice
      4) value added by ibankers in the whole process

      These are just my personal opinions,说错了请各位DX手下留情,少扔几块板砖,尤其是雷蒙同学。: )