Investment banks advise on mergers and acquisitions, earning fees as a percentage of deal value. Buy-side advisors help acquirers negotiate fair prices; sell-side advisors run competitive processes to find the best buyer. The work demands financial skill, Excel modeling, and long hours, especially for junior bankers.
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Welcome to the third part in our mini-series on banks. In this video, we are discussing an important revenue driver of the investment bank: mergers and acquisitions, also known as M&A. Simply put, M&A advisors work within the investment bank, acting as the intermediaries between an acquirer and a target. An acquirer might be another company looking to benefit from increased market share and pricing power, cost and revenue synergies, new market expansion, or access to new technologies. The acquirer might also be a financial sponsor or private equity firm seeking to acquire, improve, and then sell an underperforming cash flow generative company. The target might be a privately run company whose longstanding owners want to exit, or a publicly listed company deemed to be undervalued by public market investors, or even a financial sponsor-owned company being sold to realise upside for the PE fund. The goal of an M&A advisor is to act on behalf of the client to get the very best terms whilst executing a quick and smooth process. If a bank has a buy-side mandate, it will seek to help the acquirer buy the target for a reasonable price, ensuring that all liabilities and risks are incorporated into the final sale and purchase agreement. If the bank holds a sell-side mandate, it might need to conduct a process where potential acquirers are whittled down to the preferred buyer. Once the preferred buyer has been chosen, a short-term exclusivity period provides the space for an often frantic negotiation to complete the transaction. Supporting the transactions are a host of lawyers, due diligence providers, banks, and capital markets advisers who work together to fund and execute the deal. Execute a transaction. Now, M&A is an exciting place to work and can be very lucrative for banks who get a percentage of the total deal value. However, fees can be volatile and are highly correlated to the business cycle. Furthermore, due to the competitive and often time-sensitive nature of the industry, hours tend to be extremely long for junior bankers. Graduates who are financially proficient, enjoy Excel modelling and are willing to put in the hours will thrive in this industry.
