Are M&A bankers becoming a commodity?
Goldman Sachs' bankers may have earned hefty fees this year from advising on the likes of Mittal Steel's bid for Arcelor, but there are indications that bank is no longer in a position to command the sums it used to.
Over the past 12 months Goldman earned fees equivalent to 0.31 per cent of the $802m of deals it helped arrange, according to Bloomberg. The news service says this was down from 0.37% of deal value in the 12 preceding months.
Bloomberg points to the growing trend for corporates to employ multiple advisors, with the result that fees for each bank are now diluted. It says Goldman now shares revenues on about 50% of the takeovers the firm arranges, down from 33% in 2001.
Longer term, downwards pressure on fees and the trend in favour of multiple advisors has the potential to erode M&A bonuses, particularly if deal flow dries up. Bloomberg quotes Brad Hintz, a banking analyst at Sanford Bernstein in New York, who suggests the squeeze on fees may be here to stay: "M&A may be shifting to become a more commodity product," he suggests.
However, John Romeo, a director of the capital markets practice at consultancy firm Mercer Oliver Wyman tells eFinancialCareers.com leading M&A bankers aren't in danger of becoming a commodity any time soon: "Advisors are chosen on the basis of more than just fees alone. Existing relationships, expertise of the bankers and services from other parts of the bank create a degree of stickiness in the relationship"
