take, for example, the recent $25 million acquisition of arstechnica; how much would an investment bank that was involved in the deal expect to make?
Considering an analyst works about 80-100 hours a week, this deal would be done in 3 weeks. ha.
Although we're only around towards the end of the transaction, bankers are involved from the beginning. They typically get an offering memorandum together, help the company organize their financial data, contact potential buyers and do anything else necessary to facilitate a smooth transaction acting on the seller's behalf.
As far as fees go, we're by the hour, but bankers may very well get a % of the total deal. I certainly don't make ibanker money, but there wouldn't be anytime for my hacking side projects if I did!
Does anyone have a number from actual experience?
On a side note, now that I've seen some numbers I'm interested in learning more about becoming an investment banker :P
This was my take on it: http://news.ycombinator.com/item?id=179097
Also, it depends on a size of a deal and also on the attractiveness of the business and the market.
I had an investment banker contact me early in the year just to "start a relationship in case I ever needed help with fundraising or M&A." Is it worth meeting with these people?
Your banker should be the only third-party you need when searching for bidders. When bids start to come in, you will need lawyers, accountants, and etc., but your banker will help you find and manage these relationships.
Your job during a deal is to discuss and present the business. The banker does the rest.
However, if you have a small private business and you already have a bid that you like, the cost of engaging a banker is likely to outweigh any benefit that they can bring to a transaction.
>Do the costs change if the investment bank is involved in finding the deal?
Not in my experience. Their reward for finding a transaction for you is that they get paid. Keep in mind that your banker will always be biased in favor of making a deal happen. In my experience, we usually charged a small retainer fee to encourage the Company to do a deal as well.
>Are they useful at all in the negotiation or are they just paper pushers?
Your banker can act as a go-between, insulating you from negotiation. They will do research to try to establish what a "fair" price range would be, both for your benefit and for use in negotiation. They also are capable of bringing more bidders into the process, putting pressure on your most interested buyer.
Of course, they are far more business savvy than you are. This can work against you when they are negotiating the terms for their services. On the other hand, they usually get paid based on a percentage of the deal price, so they are incented to make it as high as possible.
>I had an investment banker contact me early in the year just to "start a relationship in case I ever needed help with fundraising or M&A." Is it worth meeting with these people?
Sure. Good bankers will try to get your business by giving you a lot of information about the market, and information never hurt.
If they know you, then they might mention your name when they are talking to firms looking to do an acquisition in your business sector.
Of course, if you're not established and you don't have a well-known name and these guys are approaching you, then they are probably not good bankers.
From wikipedia: Greed is the selfish desire for or pursuit of money, wealth, power, food, or other possessions, especially when this denies the same goods to others.
While the last part about denying the same goods to others presumes zero sum (which is debatable in the investment industries), I see nothing wrong with the rest of the definition being applied to any other capitalistic venture.
(no idea, guessing 2-10% depending on deal size)