Each year, multiple Mergers & Acquisition transactions and deals with a combined value of hundreds of millions of dollars are structure and closed on a worldwide basis. These transactions represent multiple industries, which reflect the vast amount of fees that also take place and vary from one industry to the other.
During the year of 2017, Firmex and Divestopedia have released their second annual Mergers & Acquisition Fee Guide that dispels how of advisory firms and other associated professionals across multiple industries structure their M&A fees.
With there being a large lack of transparency within this industry as a whole, it is difficult to fully determine what fees are being charged across various markets spectrums. However, the results indicated below reflect the fee structure that represents 671 professionals within the general investment banking and advisory industry on a global basis –all of who were willing to participate in the study of largely middle market mergers & acquisition fees.
In an effort to obtain a wider geographic perspective on the results gathered from this study, the following reflects responses from professionals that worked in the investment banking, M&A and similar industry from across the globe.
From a global perspective, the US takes the lead with respect to the total participants represented in this study at 42%, followed by the Western Europe / Scandinavia region that represents 32%.
Additional regions represented reflect a decline in terms of their level of participation to include Canada, Latin America, and Asia, all of which represent 6%. Eastern Europe / Russia represent 3% of the total participants, whereas Australia and the Middle East both represent 2%. Africa had the lowest level of participation, which represents 1%.
Responses Based on Market Sector
The lion’s share of the participants were Investment Bankers and/or Mergers & Acquisition Advisors. They account for a total of 471 or 70% of the total respondents that have structure deals during the year of 2017.
Seventy-four or 11% of them represent the Business Development industry, whereas 51 or 7% represent Business Brokers. Lawyers and Attorneys account for a total of 34 of the total respondents surveyed which represents 5% and 33 or another 5% is represented by professionals who work in other industries.
Only 15 Accountants were represented in the 678 respondents, which is a reflection of only 2%, which represent the lowest industry included in this survey.
The majority of the respondents, (37%) have indicated that the minimum deal size worked on at their farm is $5 million or lower, whereas deals that are $100 million or more is only represented by 4% or 18 of the total 678 respondents. What this indicates is that the larger the deal the fewer respondents. This means that more mid-size deals have taken place in the range of $5 to $10 million, which reflects 24% and 17% of the total respondents respectively. 11% represent deals with a value of $20 million and only 7% represent transactions valued over $50 million.
The transactions represented here are associated with industries that include the generalist market, which represents 23%, the manufacturing, media, and telecommunications, as well as the technology industry all of which represent 14%. These areas were followed by the consumer and retail markets and the healthcare industry, both of which represent percent 8%.
Other industries include energy and power, financial services, other miscellaneous industries and the real estate industry, all of which represent 7%, 6%, 4%, and 2% respectively.
Success Fee In Relation To the Deal Size
After all is said and done, it’s the success fee that rewards professionals who structure and close deals in the M&A industry, most of which are rewarded very handsomely for their efforts. However, the majority of the success fees are impacted greatly based on the size of the deal. As the deal increases in value, the success fee experiences a decrease in relation to the total value of the deal.
Deals with a value of $5 million typically earn success fees between 4% and 6%, and in some cases between 2 to 4%, whereas others are between 6 – 8%.
The higher value deals such as those valued at $10 million have lower fees between 2 and 4%, however, some earn between 4 and 6%.
Transaction deals valued at $20 million typically earn between 2 to 4% which is reflected by the majority of the respondents (46.9%) whereas others 25.3% typically earn between 1 and 2% in success fees.
Obviously, the larger transactions valued at $50 million, typically earn between 1 to 2% or 2 to 4% in succession fees for each deal. And consequently, the larger deals valued at $100 or $150M typically earn between 1 and 2%.
Although these fees vary, there does appear to be a pattern which, suggest that there are industry standards or market rates that appear to be consistent with similar success fees earned within this industry.
Full PDF report: Firmex.com/resources/ma-fee-guide-2017
Making Money With Short Term Rentals
Investors love investing in real estate as it usually outperforms other investment types like shares and managed funds. There are many ways to make a profit for your business with real estate too including ‘flipping’. This term refers to purchasing a revenue-generating asset and then shortly thereafter selling it again for a profit. In the US, the two asset classes mostly used for flipping are initial public offerings and real estate.
The longer-term real estate investing strategy that’s prevalent is buying homes to rent out on long term tenancies. It’s not just businesses that invest in rental properties, as a retirement strategy workers also look to have one or two investment properties in their portfolio for the weekly income and the long term capital gain on resale.
What’s also caught the attention of businesses and workers alike is the option to make money from short term rentals. Generating more income with short term rentals and by listing these properties on Airbnb is disrupting the accommodation sector and anyone with a home can do it. AirBnB is a disrupter and it has changed the way we travel. Staying in a spare room for a night or two, rather than a hotel is now accepted as the norm among all types of holidaymakers.
If you want to know how you can earn money with short term rentals, here is a quick guide.
What Is Airbnb?
Airbnb is an online marketplace for lodging around the world. It is popular among travelers who want to save money on accommodation. Because hotel rates are getting expensive, solo and group travelers are looking for more affordable options. Property rental listings on Airbnb can be a whole apartment, one room, or villas. Users can input the location and dates of arrival and departure to look for available properties.
The company started in 2008, and since then, it has reached worldwide popularity. Not only travelers are using this app, but also business-minded individuals take advantage of Airbnb’s technology to generate more money.
In the United States, there was a 45 percent increase in year-to-year bookings. Airbnb attracts millions of users worldwide, which comprises of frequent travelers and individuals who travel for work. About 700,000 companies are now using Airbnb for work-related purposes.
Earning Money with Short Term Rentals
You do not need to buy a property to list it on Airbnb. You can go for short term rentals to gain a more significant profit from daily or weekly rentals. Some people are already doing this strategy for years now, and you can also do the same if you find a property in a prime location.
Because this venture requires capital in the form of deposits, you need to be ready. Some property owners require bigger deposits, especially if the unit or apartment has appliances and furniture. Ensure that you have enough money to cover for deposits to get the business rolling. Once the apartment is ready for occupancy, you need to create an Airbnb account and list the property.
Other considerations you need to know:
- Property Maintenance
- Property Rating
Studying the market and how the business works can help you optimize the trade. Create a checklist to go through the essentials every time before a guest checks in. Besides, you can also connect with other people who do this business in different areas.
Technology opened up more profit opportunities for people. In hospitality, even you, who do not have much experience in property rentals, can earn money. Listing your extra room in the apartment can be a good start, but you can always experiment with making more profit. By short term rental, you can get access to excellent properties that can be listed on Airbnb.
Continue exploring the real estate market and make sure to learn new knowledge from experienced individuals. Who knows, you might gain financial freedom by being successful with this Airbnb venture. Check how other hosts present the properties, so you can have an idea of how to operate yours.
Home Appraisal Tips for a Successful Refinancing
The appraisal value for your home significantly impacts a refinancing application. New paint, upgraded flooring, renewed fixtures, and proper sanitation also contribute towards a satisfactory appraisal. Refinancing a home requires several necessary measures. However, the appraisal of the estate is perhaps the most significant.
If a real estate appraiser provides an assessment on the equity in your home, it can make – or break – the chance to refinance mortgage. You need the value to suit your refinancing targets, and what better way to achieve that than to improve your home?
What is a Home Appraisal?
An appraisal is a qualified and accredited professional assessment on the value of a property given by a third party. The appraiser will get paid by appraising your home with no incurred risk on whether you can refinance a mortgage or not because of the value they provide.
In a refinancing deal, an appraisal safeguards the lender by guaranteeing that it does not loan the applicant more than the value of the property. If the estate is subsequently foreclosed for any cause, the borrower will want to resell it and get their money back.
Tips to get a high-end appraisal:
The cost that the appraiser assigns your property mainly relies on the latest selling values of similar houses. However, you can definitely make sure that your property is appraised to its maximum value.
Having your house appraised is like meeting a potential partner. Although you do not know what the person likes and how they will judge you, dressing well improves your chances. Your estate must be clean and organized, tidy, and comfortable to examine. Pets should be kept in place, and the scent blocked. You will not want to rush the appraiser before inspecting everything.
Appraisers are especially particular about:
- External and internal condition
- Overall room number
- Features, including layout design and functionality
- Kitchen and bathroom upgrades, walls, roofing, and home systems (air conditioning, plumbing, and electrical) throughout the past 15 years that have made the house updated, usable and livable for current standards
- State and condition of the house’s structures
- External facilities, including garages, stairs, and balconies location
It’s also wise to emphasize characteristics that might not be readily noticeable, which might contribute to the value of the property. If there are any upgrades that are not seen, it would be good to let the appraiser know.
After securing a reasonable appraisal, you have achieved a significant step toward refinancing your loan. You can now proceed to the next steps with your mortgage lender. If you have received a good value, use a resource such as the Consumer Financial Protection Bureau’s Mortgage Calculator to check interest rates on refinanced loans with the same pricing for your house. Coming equipped with these statistics will provide you more negotiating power once you face your lender. It will also help you feel confident in asking for the rate that you deserve.
Knowing how appraisals work will provide you with the strongest shot of getting an appraiser to award the maximum value for your estate. Appraisals may not always arrive with the ideals that applicants aim for, and they are a subjective method with room for human error. You can appeal if you have a low rating, but you will only survive with reliable information to back you up.
Commercial Loans: Options and Benefits for Start-ups
Running a business requires working capital to hire staff, buy equipment, and cover for utility bills.
For start-up firms, having a huge capital is not always guaranteed, and commercial loans provide funding to get the business rolling. The problem is, not a lot of business owners are confident and educated enough to borrow money from lenders.
In case you are wondering how the commercial loan works, here is a guide to help you understand how the process, options, and why your business needs it.
What are Commercial Loans?
A commercial loan is a type of financial assistance that helps businesses address everyday costs and begin the next stage in their business journey. Most of these loans have fixed rates and monthly payments but require collateral that should be equal or greater than the loan amount.
The most common types of financing options are:
Small Business Administration Loans
SBA loans are similar to traditional loans but with longer terms and lower interest rates. The only downside is, borrowers need to wait for long to get the funding. Loan terms can be a minimum of 5 to a maximum of 15 or 30 years.
Business Line of Credit
This type of commercial loan gives a borrower more flexibility in borrowing money. The lender will provide a pool of funding that you can draw from whenever you need it. You will only pay the interest of the money you take out.
Traditional Term Loans
Traditional term loans are the most basic of all, wherein a business owner borrows a specific amount and payback with interest. Lenders charge rates depending on the creditworthiness of a business.
Benefits of Commercial Loans
Easy access to funds can help you focus on improving your services and gaining more clients. Loans provide a breathing space for you to focus on your business and not think about money. As you work on expanding your reach, hiring talented people, and boosting marketing, you can expect growth.
Commercial loans provide credits up to $25 million and help you increase working capital and create more jobs. Also, long-term loans are easier to pay back while you are still building your business.
If you are planning to apply for a large-scale loan in the future, starting with short-term loans can help you build a business credit card. Start-ups usually don’t qualify for larger loans because of the risks involved and lack of credit history. Try going low first to build up your report and increase the loan amount eventually.
Go After a Business Opportunity
Got a new idea to grow your business but lacks funding? Consult a financial advisor to know your options and get a low-interest commercial loan. Weigh your options carefully and go directly to a reliable lender for secure loans.
Taking risks is part of running a business. If you believe in what you are selling or providing to customers, then consider commercial loans to take your business to a new level. Contact North Avenue Capital to learn your options for business and industry loan programs.
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