M&A How Industry Leaders Structure Their Deals – Fee Guide 2017
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