TheCanaryConsultant1
New member
- Jan
- 18
- 7
Many students will think working in M&A is tiring, and that it means working from early in the morning until late in the evening (or early the next morning). Other students believe this entails only working on PowerPoint presentations – which is in fact often the case. However, this would only apply in your early years as a junior banker. The more experience you gain, the more exciting it gets. Further down the line, you will have a chance to work on business models, and work on a transaction from start to finish. Negotiating terms and structure will however require more experience, and will likely be possible only from the Vice President level. Overall, what does this mean more precisely, and what is the day-to-day work like?
M&A bankers are advisors to public or private corporations, pension funds, and private equity investors to help them purchase or sell a new company, or a single asset. In M&A, there is the buy side and the sell side. M&A advisors usually prefer sell side mandates because the probability for your client to sell the asset/company is very high, hence the probability to get a success fee will be high as well. However on the buy side, the more bidders there are, the less likely your client is be to be selected in the end. This is one of the occasions when Managing Directors will step in and make a difference: using their connections to get more deals for the team. Some well-known banks like J.P. Morgan or Goldman Sachs will have the luxury of being able to pick the best, or more precisely the more lucrative deals, whilst smaller banks or boutique M&A firms will look for the smaller deals, or those which appear more complicated to close (mostly on the buy side, since it’s less likely to get a success fee).
In summary, M&A advisors work for their clients, and will answer all of their requests. They are the intermediary between the seller (or buyer) and their client, which will include reviewing many documents, and asking or answering a lot of questions. The role of the advisor is to use their experience to best understand the asset, and help its client to buy or sell it. This will include the valuation of the asset, which can be accomplished using different methodologies, including with a cash flow model or peers comparison. Because M&A bankers have many different transactions going on at the same time, they will have to read through a lot of information and prepare several documents. This is why M&A bankers work very long hours, but it also means they are paid accordingly. M&A bankers will generally be paid on a success fee, and sometimes add a monthly retainer (i.e., a monthly fee, not based on the success of the transaction) for the buy side to still get some reward for the work done if a transaction does not go through. Fees will depend on the size of the transaction, and who the bank is. If this is an important reputable bank, fees will likely be higher, unless the deal is seen as very lucrative, and the bank is willing to lower its fees in order to win the mandate. In my experience, fees for transactions above USD 300m are around 1.5% - 2%. According to Class VI Partners (https://www.classvipartners.com/blog-article/the-mysteries-of-ma-fees/), fees for USD 100m+ transactions will be between 1% and 3%, but again the fee structure might vary and offer some upside if a deal goes better than expected. Receiving 2% may not sound like much at all, but when you bear in mind that this could be for a USD 100m transaction, it represents a more tempting USD 2m fee. For this kind of deal, a single M&A team of 5 people will be enough for most of the transaction which is likely to close within 6 months. If you add up all the deals that one team can take simultaneously, this quickly adds up to tens of millions - for a team of 5 people, and per annum (that is if they are all successful of course).
A lesser-known but quite similar work is corporate development. The corporate development team will be the equivalent of the M&A bank, but will be employed and work for the corporation itself. A big corporation like Trafigura will have its own M&A team in house. The difference between M&A and corporate development is that the corporate development analyst will be working on multiple deals, but only for the company this analyst works for. For example, if an analyst works for Company A, and company A wants to acquire company B, the analyst will study, value and work to make this transaction happen, including structuring and financing as well. The analyst will also work on integrating the asset within Company A once the transaction has closed. This way of working is different from M&A : the corporate development team works for the strategy of one company, to develop it over the longer term, whereas an M&A team will look to close one deal for one client and move on to the next deal (remaining in good terms with the client in case other deals come up). It is a different kind of work compared with M&A since the analyst needs to understand the business of the company, and find the best structure to acquire and finance the company, or asset. This means working on different work streams, which requires a lot of resources. Corporations that already have an in-house M&A team, will sometimes hire an M&A advisor to help with the transaction so the corporation's M&A team can focus on the strategy for the group, as well as the financing and structuring of the transaction in parallel : corporate development can be seen as project management for M&A transactions. Those teams typically work shorter hours than M&A bankers because the deal flow is different, and the team focuses on the strategy of the wider group, and not on having as many deals as possible. This also means that a corporate development analyst tends to have a lower salary than an M&A banker given the work load is not as intense.
In conclusion, there is not necessarily a better career choice out of those options - it really depends on what you are looking for personally, and what kind of work/life balance you are after.
M&A bankers are advisors to public or private corporations, pension funds, and private equity investors to help them purchase or sell a new company, or a single asset. In M&A, there is the buy side and the sell side. M&A advisors usually prefer sell side mandates because the probability for your client to sell the asset/company is very high, hence the probability to get a success fee will be high as well. However on the buy side, the more bidders there are, the less likely your client is be to be selected in the end. This is one of the occasions when Managing Directors will step in and make a difference: using their connections to get more deals for the team. Some well-known banks like J.P. Morgan or Goldman Sachs will have the luxury of being able to pick the best, or more precisely the more lucrative deals, whilst smaller banks or boutique M&A firms will look for the smaller deals, or those which appear more complicated to close (mostly on the buy side, since it’s less likely to get a success fee).
In summary, M&A advisors work for their clients, and will answer all of their requests. They are the intermediary between the seller (or buyer) and their client, which will include reviewing many documents, and asking or answering a lot of questions. The role of the advisor is to use their experience to best understand the asset, and help its client to buy or sell it. This will include the valuation of the asset, which can be accomplished using different methodologies, including with a cash flow model or peers comparison. Because M&A bankers have many different transactions going on at the same time, they will have to read through a lot of information and prepare several documents. This is why M&A bankers work very long hours, but it also means they are paid accordingly. M&A bankers will generally be paid on a success fee, and sometimes add a monthly retainer (i.e., a monthly fee, not based on the success of the transaction) for the buy side to still get some reward for the work done if a transaction does not go through. Fees will depend on the size of the transaction, and who the bank is. If this is an important reputable bank, fees will likely be higher, unless the deal is seen as very lucrative, and the bank is willing to lower its fees in order to win the mandate. In my experience, fees for transactions above USD 300m are around 1.5% - 2%. According to Class VI Partners (https://www.classvipartners.com/blog-article/the-mysteries-of-ma-fees/), fees for USD 100m+ transactions will be between 1% and 3%, but again the fee structure might vary and offer some upside if a deal goes better than expected. Receiving 2% may not sound like much at all, but when you bear in mind that this could be for a USD 100m transaction, it represents a more tempting USD 2m fee. For this kind of deal, a single M&A team of 5 people will be enough for most of the transaction which is likely to close within 6 months. If you add up all the deals that one team can take simultaneously, this quickly adds up to tens of millions - for a team of 5 people, and per annum (that is if they are all successful of course).
A lesser-known but quite similar work is corporate development. The corporate development team will be the equivalent of the M&A bank, but will be employed and work for the corporation itself. A big corporation like Trafigura will have its own M&A team in house. The difference between M&A and corporate development is that the corporate development analyst will be working on multiple deals, but only for the company this analyst works for. For example, if an analyst works for Company A, and company A wants to acquire company B, the analyst will study, value and work to make this transaction happen, including structuring and financing as well. The analyst will also work on integrating the asset within Company A once the transaction has closed. This way of working is different from M&A : the corporate development team works for the strategy of one company, to develop it over the longer term, whereas an M&A team will look to close one deal for one client and move on to the next deal (remaining in good terms with the client in case other deals come up). It is a different kind of work compared with M&A since the analyst needs to understand the business of the company, and find the best structure to acquire and finance the company, or asset. This means working on different work streams, which requires a lot of resources. Corporations that already have an in-house M&A team, will sometimes hire an M&A advisor to help with the transaction so the corporation's M&A team can focus on the strategy for the group, as well as the financing and structuring of the transaction in parallel : corporate development can be seen as project management for M&A transactions. Those teams typically work shorter hours than M&A bankers because the deal flow is different, and the team focuses on the strategy of the wider group, and not on having as many deals as possible. This also means that a corporate development analyst tends to have a lower salary than an M&A banker given the work load is not as intense.
In conclusion, there is not necessarily a better career choice out of those options - it really depends on what you are looking for personally, and what kind of work/life balance you are after.