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
Financing A Business With A Home Equity Loan
Finding funds for a business is no easy task. Qualifying for a business loan is not guaranteed; therefore many companies leverage their owners’ assets like the family home to raise the funds they require in their enterprise.
There are many ways to use personally guaranteed funds too and one option is what’s called a home equity loan or home equity line of credit, These loans can also be ideal for debt consolidation of say high-interest borrowing like credit cards, personal and short term loans but in this blog post we’re focusing on how these loans work for businesses.
There are many more obstacles or hoops to jump through when seeking an actual business loan and often it’s the financial statements of the business that fail to pass the lending criteria due to the startup phase requiring more investment and not showing a profit.
Entrepreneurs starting out, are therefore renown for sourcing investment from wherever they can get it. The credit card has been the go-to source for funds, but the interest rates are very high, so it’s not a long term borrowing solution for a business.
Before long, the owner is seeking other sources to keep the business afloat or to grow it. They may take out personal loans but before long their requirements exceed what they borrow without additional security so this is where many use their home.
As a business owner, it may make perfect sense to use a home equity line of credit to draw down funds for the business and then repay them when in lump sums and repeat as and when required. So what is a HELOC?
This type of loan allows you to have an open line of credit on the equity you have in your property.
HELOC’s has longer repayment periods that can be 10 – 20 years much like a usual mortgage and as the property owner you can borrow up to 85% of the home’s value minus what you may owe it. For example, if your home is valued at $750,000 and you have a mortgage of $250,000 on it already. Your line of credit may be as much as $425,000.
HELOC rates are higher than your standard mortgage rate, so it’s very much ‘caveat emptor’ or buyer beware, get professional expert advice from your accountant, financial advisor and maybe also your lawyer. Remember all loan agreements are legal documents, and they have terms and conditions that the borrower must comply.
There are many other ways to fund your business, including angel investors, offering shareholdings, so while using the equity in your home is an option it may not be the best way forward as the risk is your business cannot pay back what it’s borrowed, and you are personally liable to repay it or lose it.
Remember it is your equity and if your business borrows too much of it and can not repay it, and the lender calls in the loan it could be that you are forced to sell your home. It’s a dreary thought, but it’s better to know the pros and cons when borrowing money for any venture.
Young Money: How To Fund A Startup
Have you got a great idea for a business and now you want to make it happen? You’re not alone. While every business with the idea, commercialising it is a whole new site of skills. Getting a startup business up and running is a challenge for anyone who has not done it before.
Entrepreneurs don’t usually have the ideas, i.e. they’re not the creative talent. They’re the people, the ideas creators turn to, when they want to see how far they can take the idea and turn it into a viable business.
The start up phase of any business involves a lot of working hard, but not exclusively, it also requires investment. Seed money can come from various sources. Without the money, to get started and provide ongoing investment as the business shows promise, your venture may take too long to mature and a competitor takes your place in the eye of the consumer. So where can the investment come from?
There are a lot of different funding options available for small businesses, and they all offer their benefits. You can find some examples of the most popular methods below, along with some additional information to help you choose which route might be best for you.
You will need to invest in yourself, i.e. put some of your own money in. If you have not got savings, consider other options, like your home loan. This is a hugely popular option for start ups that fail to get funding from other sources. Caveat Emptor: Always seek professional advice from your accountant, lawyer etc before taking on debt.
So if you have money saved up or can get a loan from a bank, funding your business will be a fast process. As aforementioned, there will be a personal risk here, but you won’t have to prove to anyone that your business will work, making it great for those who can’t get further than a concept without some capital.
Some banks and governments will offer loans to new businesses. In most cases, you will have to have existing cash flow to make this work, limiting the successful startups will have with it.
If you can convince an investor with the money to back your idea, you won’t have to look at other types of funding for business, as you will have both money and support. This isn’t always easy to find, and you will have to prove that your idea is worth their time, making it hard for those with nothing but a concept.
Personal Risk vs. Sacrificing Freedom
The choice you make when you’re choosing how your company will be funded largely rests on what is more important to you.
If you are willing to take on personal risk, using your own money can be a great way to go, as it will give you all the freedom you need to build the business you’ve been dreaming about.
For those who would rather keep their money safe, making a couple of compromises along the way can be a small price to pay for an investor or venture capital. This is a very personal decision to make.
Why Isn’t The Bank An Option?
A lot of startups find disappointment when they approach a bank for a loan to get themselves off the ground.
Unfortunately, history has shown that being too willing to offer new businesses money can result in heavy losses, and banks have learned for their mistakes. Before you can convince a company like this to support your venture, you will need to prove that it can make enough to pay it back, and most startups just don’t have the income.
Choosing the funding option which you use for your startup has always been a challenge. It’s becoming more common to find businesses which cost nearly nothing to get started, opening the doors to another idea for you to consider.
Best Cryptocurrency to Buy – Which Is Best?
A lot of people might say that cryptocurrency’s big moment has ended. After the sharp rise and precipitous fall of bitcoin, many strait laced investors soured on the idea of crypto investment. Crypto’s 15 minutes of fame were over, the thinking was, and it was time to move your money back to safer, and more standard commodities.
This, however, is just not true. Cryptocurrency continues to be a sound investment, if you know the best cryptocurrency to invest in. We’ve compiled a list of four great picks below.
Ethereum is sometimes thought of as bitcoin’s chief rival, which perhaps makes it the second-most famous cryptocurrency. Ethereum is also commonly thought of as an expansion of blockchain technology beyond bitcoin. It is traded as a cryptocurrency, but it also has value as a decentralized computing platform.
Ethereum includes a programming language that runs on blockchain. So, it is used by developers to create apps, including health and security infrastructure, music licensing services, and even anonymous browsers. Ownership of an Ethereum token is recorded on the shared blockchain ledger, as it would be on any cryptocurrency.
However, Ethereum expands this practice to record the ownership of copyrights, music, documents, financial instruments: anything imaginable. By purchasing Ethereum, you are investing in this network, rather than the security as such. For this reason, Ethereum is an excellent investment and one that the savvy investor should be scoping out.
For fame and notoriety among the cryptocurrencies, none can match bitcoin, the original cryptocurrency in many people’s minds. Now more than a decade old (the mysterious Satoshi Nakamoto published the bitcoin white paper in 2008), bitcoin has had its share of ups and downs.
For the savvy investor, though, bitcoin can still be a sound investment. After the massive — and massively famous — December 2017 peak, the price of bitcoin has held steady between $3,000 and $6,000 per coin. As bitcoin matures as a security, it is looking more and more like a place to park your money, rather than the white-hot investment it was two years ago. This is not a downside, because investors need (and will take) both options.
It started as a joke — a play on the classic “doge” meme. But since its inception in 2013, Dogecoin has grown to a market cap of over $312 million dollars in April 2019, with values soaring as high as $2 billion in January of 2018. Dogecoin’s value fluctuations will be familiar to anybody who has traded in penny stocks. It maintains a steady mean value, punctuated by regular spikes in its price.
The trick, as it were, is to buy it just after a spike in its price, and to sell it during the next spike. While Dogecoins are not a strong long-term investment, they can be a decent swing investment if you have the time and energy to monitor them. The origins may be silly, but the money is very real.
Litecoin is a cryptocurrency specifically developed for zero-cost payments. Litecoin was developed to have a faster transaction confirmation than Bitcoin. This emphasis on fast, secure transactions has made Litecoin one of the most popular coins with businesses interested in security.
For this reason, the value of a single Litecoin has risen from $30 to $78 in the past six months, well below the mean value. This is the perfect opportunity for an investor to swoop in. As security becomes increasingly important to businesses across the board, Litecoin begins to look like a better opportunity than ever.
- Management2 years ago
20 Of The Worst Business Decisions Ever Made
- Finance2 years ago
What are the Advantages And Disadvantages of Business Loans?
- Marketing1 year ago
Creating Brand Identity for Small Business [Infographic]
- Finance9 months ago
Why Entrepreneurs Often Fail
- Marketing2 years ago
What You Can Learn From Amazon’s Marketing Strategy
- Social Media3 months ago
In-Depth Guide to Social Media for Small Businesses
- Mindset4 months ago
Entrepreneur Newcomers Join Billionaire Rich List
- Mindset8 months ago
5 Positive Impacts of Green Businesses On Employees’ Wellbeing and Performance