Comments on: Transaction costs and Investment Banking http://strat.in/2009/08/nature-of-investment-banking/ strategy, management and all that follows ... Mon, 06 Sep 2010 10:46:03 +0000 hourly 1 http://wordpress.org/?v=3.0 By: Priyanka Chandran http://strat.in/2009/08/nature-of-investment-banking/comment-page-1/#comment-3588 Priyanka Chandran Wed, 19 Aug 2009 15:19:24 +0000 http://strat.in/?p=2030#comment-3588 Statistical/ Empricial evidence may point to the fact that the M&A transactions are not successful in value creation . What probably needs to be questioned here is whether financial models actually value everything that is to be valued ? Execution issues and the buyer’s inability to realize synergies by integrating operations are not quantified anywhere. Even some opportunity costs are not factored in.So even if we assume for a second that a banker has foregone his monetary gain in the interest of the client, there is an inherent flaw in the whole "valuation" process which makes the whole concept of M&A itself questionable apart from the often highlighted issues like "winners curse" . Though I do agree that bankers do not belong to the class of puritans but blaming them completely is sth i dont completely agree with. Statistical/ Empricial evidence may point to the fact that the M&A transactions are not successful in value creation . What probably needs to be questioned here is whether financial models actually value everything that is to be valued ? Execution issues and the buyer’s inability to realize synergies by integrating operations are not quantified anywhere. Even some opportunity costs are not factored in.So even if we assume for a second that a banker has foregone his monetary gain in the interest of the client, there is an inherent flaw in the whole “valuation” process which makes the whole concept of M&A itself questionable apart from the often highlighted issues like “winners curse” . Though I do agree that bankers do not belong to the class of puritans but blaming them completely is sth i dont completely agree with.

]]> By: Abhishek http://strat.in/2009/08/nature-of-investment-banking/comment-page-1/#comment-3278 Abhishek Fri, 14 Aug 2009 15:01:58 +0000 http://strat.in/?p=2030#comment-3278 I guess the absence of price wars by refusing to slash fees is common of many businesses where the players have been around for a long time and know that none of the others is likely to start a price war. Also, for corporates (clients), the difference in total costs due to a marginal difference in fees is relatively insignificant, making demand less elastic to price. As an aside, it would be nice to have some analytical comments on this post either questioning (or supporting) the logic.. Just want to make sure I am not making some obvious logical errors.. (Sorry if this sounds like an attempt to solicit comments, trust me it's not!) I guess the absence of price wars by refusing to slash fees is common of many businesses where the players have been around for a long time and know that none of the others is likely to start a price war. Also, for corporates (clients), the difference in total costs due to a marginal difference in fees is relatively insignificant, making demand less elastic to price.

As an aside, it would be nice to have some analytical comments on this post either questioning (or supporting) the logic.. Just want to make sure I am not making some obvious logical errors..

(Sorry if this sounds like an attempt to solicit comments, trust me it’s not!)

]]> By: Ankur Vyas http://strat.in/2009/08/nature-of-investment-banking/comment-page-1/#comment-2958 Ankur Vyas Tue, 11 Aug 2009 09:08:44 +0000 http://strat.in/?p=2030#comment-2958 Hey! great article. it was very thought-provoking. I would like to feature it on my men's entertainment web publication. Thanks again. Hey! great article. it was very thought-provoking. I would like to feature it on my men’s entertainment web publication. Thanks again.

]]> By: Anonymous http://strat.in/2009/08/nature-of-investment-banking/comment-page-1/#comment-2866 Anonymous Mon, 10 Aug 2009 12:50:48 +0000 http://strat.in/?p=2030#comment-2866 Very nice article. One point I think which you did not mention was the percentage fees charged never goes down even though there are many players on the street. It is because all the players know that once one of them reduces their fee then it will be a downward spiral ending at rock bottom. Very nice article. One point I think which you did not mention was the percentage fees charged never goes down even though there are many players on the street. It is because all the players know that once one of them reduces their fee then it will be a downward spiral ending at rock bottom.

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