Corporate Finance Fees and Quality of Service | Round Table Discussion

Neil Ackroyd

OK, so moving onto the sticky subject that I am sure a lot of people are tuning in to hear about, what should we be paying these guys for the privilege of being appointed?

Bob McNaughton

From my experience in dealing with the lawyers, you are really paying for the amount of work that is being put in. There is a degree of contingency involved but usually that revolves around whether the transaction happens or not. There isn’t really a success fee – either the transaction happens and there is a level fee estimated on the amount of hours that they have put into it rather than a percentage of the transaction.

Neil Ackroyd

Yes, Chris another point that comes out of what we are saying is that whilst you might pay a commitment fee for a corporate finance advisor and then the bulk of their fee on the successful legal completion of the deal, it is appropriate to incentivise a corporate finance advisor to try and get a deal done because that is why you are going to them. Whereas with a lawyer, if you make it too contingent ie you make too much of it reliant on the success of the deal then you are taking away some of the incentive to actually give you the advice not to do the deal and you want somebody like a lawyer to feel comfortable to advise you not to do a deal.

Chris Hale

Sometime the best advice is don’t do the deal and you are absolutely right and occasionally I deliver that message.

Chris Williams

When I have been working with lawyers, I think the key thing rather than thinking of it as a percentage or as a success fee as you do with a lead corporate finance advisor, is look at the complexity of the transaction to talk through with the lawyer you have chosen, get the very best estimate you can and then work with your lawyer to stick to that and it is a two way thing. If you make the transaction longer or more complicated, more difficult then it is going to cost more but if you choose the right lawyer, sit down and really talk about it upfront, understand what’s in it and then work together to try and stick to that – that is the only advice that I can give.

Neil Ackroyd

If you are coming into this transaction not having a raft of lawyers who you know who to go to, would you say that it would be fair to work with your lead advisor to help to appoint your lawyers?

Chris Williams

You should certainly take references and if at all possible, I would meet a couple of lead advisors and perhaps a couple of lawyers and you also want then to take references so talk to your lead advisor about your lawyer and talk to your lawyer about your lead advisor and if at all possible try and find two people who have worked together as well because that will help in terms of making things as smooth and easy as possible.

Neil Ackroyd

Thank you very much for your time today and joining us on Corporate Finance TV and I think that we have shared quite a lot of knowledge with our users and it should help them choose the right team. Thank you very much.