3. Incentives for Advisers

If a merger deal goes ahead, the investment bank advisers will typically receive a substantial success fee calculated as a percentage of the deal value. Moreover, there will also often be lucrative fees for organising the funding of the deal. If the potential bidders decide against going ahead, the advisers will only recoup their costs. The advisers gain much more if the deal goes ahead than if it is aborted. Going ahead to deal completion also brings longer term benefits for the adviser. It strengthens the bond with the CEO and CFO, improving the prospect of repeat business. And just as published success tables for executives emphasise size, so also those for M&A advisors highlight total fee income. Completed deals therefore raise the profile of an advisor visible to other prospective bidders. Consequently, advisers sometimes do not wait for bidders to approach them for support in completing a deal identified by the acquirer executives: they search for firms they can suggest to potential acquirers as suitable targets. The rewards are substantial: in one example reported by the Financial Times the banks advising bidder and target charged £96 million ‘for a few weeks' work’.