Who Earns How Much in M&A?

In one of the previous articles (see Monetary Frenzy Period ), we talked about how the lowering of the borrowing costs of the central banks of developed countries is a motivation tool for mergers and acquisitions for companies. Therefore, we see that these financial transactions, one of the most strategic moves for companies, have increased recently. This increase also creates many job opportunities in areas such as investment banking and legal counseling, which has long been on the agenda of how much money banks make from these jobs. So who really earns how much in this business? Let’s try to answer this question by going through an extremely large example.

Our sample; alcoholic beverages are a manufacturer of Anheuser-Busch InBev ‘s SABMiller ‘ s $ 107 billion to purchase. This is the fourth largest deal of the century we’re dealing in (no one that passed AOL’s acquisition of Time Warner for $ 164 billion in 2000). Although I think that it will be a good example with this aspect, I think it would be appropriate to develop a suitable perspective for the sector while examining the expenses made during the agreement.

First of all, let us note that a $ 75 billion loan was used by AB InBev, which is the largest commercial loan in history. The banks that gave this loan are; Banco Santander, Bank of America., Bank of Tokyo-Mitsubishi, Barclays, BNP Paribas and Deutsche Bank .

As a result, returning to the spending made during the purchase, we see a total of $ 202 million spent for the purchased SABMiller. Its,

  • 113 million dollars for financial consultancy,
  • 76 million dollars for legal counseling,
  • $ 9 million for public relations consultancy,
  • $ 2 million for accounting consulting
  • and $ 2 million was spent on other expenses.

For AB InBev, who made the purchase, the expenditures are larger, and we see that a total cost of $ 1.73 billion has been reported. Its

  • In the process of financing $ 725 million,
  • For taxes and other expenses of $ 475 million,
  • $ 185 million for legal advice,
  • For professional services including 180 million dollars management consultancy, actuaries, private asset valuations,
  • 135 million dollars for financial consultancy,
  • 20 million dollars for public relations consultancy,
  • $ 15 million was spent on accounting consulting.

Considering the sector, we see that public relations expenditures are at the forefront, and the expenditures made for this are even above the accounting consultancy expenditures including a process such as due diligence. The importance of financial consultancy should have emerged in creating valuation for the purchased party, which is an important part of SABMiller expenditures. Tax expenditures are not to be underestimated.

With all this, low interest rates are likely to buy and indirectly support investment banking.

Leave a Reply

Your email address will not be published. Required fields are marked *