What's the Difference Between M&A in Consulting vs. Investment Banking?

When you hear about a merger or an acquisition, most likely, you think about investment bankers working long hours and closing billion-dollar deals. You are not wrong, but unfortunately, it is only half the picture. In the market, you can also find consultants and advisors facilitating transactions like Staffing Brokerage, one of the best M&A advisory firms.

Both investment bankers and consultants play a crucial part in mergers and acquisitions; however, their objectives, services, and timing in the process differ. Here, we shed light on the difference between the two for your better understanding.

Decoding M&A

In M&A, M stands for merger, which means two firms becoming one to form a new entity in the market. Next, A stands for acquisition, which refers to the situation when an individual or a business purchases a new firm. Both mergers and acquisitions are utilized to grow a business, gain new markets, access new technologies, or receive a financial advantage.

M&A is a complex process that involves evaluating the target company’s value, ensuring strategic and cultural fit, planning integration, managing risks, and growth after the deal. Investment banks and consulting firms facilitate the whole process, helping business owners navigate complexities.

Role of Consulting Firms in M&A

Consulting firms act as your strategic partners for the transaction. They do not just rush to complete the transaction, but also ensure it delivers long-term results. Majorly, consulting firms help in four ways.

Pre-Deal Strategy

Before the process starts, consultants help business owners decide why to pursue M&A. They analyze the client’s business goals, market trends, competitors, and potential synergies. This phase determines whether the deal makes sense. Based on the findings, M&A consultants prepare effective strategies for the transaction.

Due Diligence

Consultants conduct thorough due diligence to study the target company’s customers, products, market share, and prestige. They help the buyer understand if the targeted firm is actually worth the price and the related risks to the deal.

Integration Planning

If the deal seems good, consultants plan for integration. They make effective strategies to seamlessly merge the two entities, including their teams, processes, technologies, and culture.

Post-Merger Support

Even after the deal is closed, M&A advisors keep on assisting the client. They help merge systems, align company cultures, and ensure the expected result, like revenue growth, is delivered by the transaction.

Work Hours & Culture

M&A consultants work for long hours during intense phases of a deal; however, their work-life balance is better than that of bankers. The environment in M&A consulting features collaboration, brainstorming, data modeling, and strategic meetings.

When to Choose Consultants for M&A

You should choose an M&A consulting firm in the following situations.

• You want to know whether the acquisition or merger is sensible or not.
• You need professional assistance with due diligence and strategy.
• You want guidance on post-merger integration or culture alignment.
• You want long-term results from a transaction, not just a deal closure.

Role of Investment Banking in M&A

Investment banks can be considered the dealmakers of the M&A world. The following points share how investment banks operate:

Deal Origination

Investment bankers identify companies looking to buy or sell and match them with suitable partners. They act as a bridge between the buyer and the seller.

Valuation & Financial Modeling

They evaluate a company’s worth by analyzing its balance sheets, cash flow projections, and market comparisons. The financial models form the foundation of deal negotiations.

Marketing the Deal

After the valuation is done, bankers prepare presentations, also known as pitch books, and contact investors and buyers to generate interest in the transaction.

Negotiation & Structuring

Bankers handle negotiations, determine deal structure, and ensure that both parties agree on fair terms.

Closing the Deal

Lastly, investment bankers handle lawyers, accountants, and regulatory teams to ensure a smooth transaction closure.

Compensation for the Service

Unlike M&A consultants, investment bankers earn a success fee, which is generally a percentage of the total transaction value. Bankers usually charge 1%-3% for big transactions and a higher percentage for smaller deals. They also earn a retainer fee for offering advisory and preparation work.

Work Hours & Culture

M&S investment banking has a fast and intense environment, with bankers working for 80 to 100 hours a week, especially when deals are live. The culture is transaction-driven, competitive, and financially focused.

When to Choose Investment Banks for M&A

You should choose investment banks for your merger or acquisitions if:

• You are ready to buy or sell a company.
• You need assistance with valuation, deal structure, and negotiation.
• You want access to potential buyers, investors, or capital markets.
• You wish to maximize the value of the transaction and close it efficiently.

After reading this blog, we can say that M&A consultants focus on strategy, analysis, and post-deal success. On the other hand, investment banks focus on deal execution, valuation, and negotiation. Do you need M&A consulting services? Then you are in the right place; we are Staffing Brokerage, a team of professional M&A advisors. We offer M&A consulting and facilitate the complete transaction, helping you navigate the complexities of the transaction. It means you don’t need to first go to a consulting firm and then to an investment bank. Contact us and book your service today.