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 September 05, 2017
 Written by Chunshek Chan, Dealogic Research

As the economy recovers, firms are now more judicious when deciding on advisory services in M&A, while advisors are becoming more selective.

Advisors are becoming more selective

In the wake of the financial crisis, investment banks accepted advisory mandates at a lower bar. They provided M&A advisory service at a lower deal size threshold than what they previously were less inclined, or refused, to advise on. However, economy and boardroom confidence have recovered, and now banks can afford to be more selective when choosing projects. In 2010, banks provided M&A advisory on deals valued at an average of $119m for targets/divestors, and $102m for acquirors. Today the average advised deal value has risen to almost $200m for both target/divestor and acquiror advisory roles, despite overall M&A volume declining since its peak in 2015.

 

Corporates getting pickier as well

Similarly to banks, corporates are also becoming more judicious when deciding to hire advisors on M&A deals. Even though 13%–15% of M&A deals retain advisors regardless of size, more than 70% of deals worth over $1bn have retained advisors, while 20–30% of corporates prefer an in-house advisory service. Recently corporates have become more reluctant to hire advisors on smaller M&A deals, according to Dealogic analysis of the M&A market. In 2010,  corporates retained advisors on deals averaging $11om for sellers, and $150m for buyers. Now sellers and buyers hire advisors for slightly larger deals, averaging $192m and $238m, respectively.

 

 

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Data source: Dealogic, as of September 5, 2017