M&A Bankers Suffer 35% Drop in Fees as Deals Dry Up From Record  

As reported in Bloomberg

 

March 31 (Bloomberg) — Mergers and acquisitions bankers suffered a 35 percent drop in fees during the first quarter, just weeks after cashing bonuses from a record year.

Advisory fees fell to about $8.7 billion from $13.4 billion in the first three months of 2007, data compiled by analysts at New York-based Freeman & Co. show. Executives at Lehman Brothers Holdings Inc. and Bank of America Corp. predicted in December that takeovers would decline about 20 percent this year.

“As recently as three months ago, we thought we had seen the worst and it was going to begin to get slowly better,” said Eduardo Mestre, 59, the former head of Citigroup Inc.’s investment banking unit and now vice chairman of New York-based advisory firm Evercore Partners Inc. “It only got worse.”

The collapse of the U.S. sub prime mortgage market threatens to stifle economic growth and further curb corporate purchases. New York-based Goldman Sachs Group Inc., the world’s leading M&A adviser, reported a 47 percent decline in revenue from providing takeover advice in the first quarter from the fourth.

Our Perspective 

Is bigger always better?

Companies are looking to expand their footprint, increase their brand awareness.

Once a merger or acquistion is proposed, all the due dilligence is done upfront. Attorneys and accounts pour over documents and make recommendations as to the feasibility of the proposal.

Once all the i’s have been dotted and the t’s are crossed, signatures are placed on the contract. The next step is that all these papers must be sent to the state(s) to be registered.

The wheels come off the cart 

Once the contracts have been signed, all the focus goes into reviewing the existing operations and implementing efficiencies. What most companies fail to realize is that the states have a very difficult time recording these transactions.

 50% error rate 

The Department of Labor statistics show that 50% of the companies who have been involved with a merger or an acquisition have been assigned the wrong rates and as a result are overpaying payroll taxes.

How can this be? Isn’t this 2008! 

Again, let me make this clear. These errors have nothing to do with all the due diligence that was done prior to the acquisition or merger. Companies fail to take the next step and determine if these transactions were properly recorded.

Our clients are taking the next step.

We have a 90% success rate.

Our clients’ rates are corrected. 

They are getting refunds. 

Has your company been involved in a merger or acquisition within the last 3 years?

What rates were assigned to your company?

These errors can effect as many as 5 different tax rates.

Are you overpaying payroll taxes? 

Our services are done on a contingency fee.

There are no upfront costs.

Let us know your thoughts?

Do you have a question?

You may email george@hbsadvantage.com

Hutchinson Business Solutions ……Your CFO on the Go.  

Creating Opportunities Today,…Defining Savings for Tomorrow.

Visit http://www.hutchinsonbusinesssolutions.com/ to learn more about saving opportunities available for your company. 

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