2017 M&A research cost comparison

It seems like 2017 is the year of increasing costs for M&A firms.  Data cost from large enterprise tooling providers have shifted and labor costs are on the rise all while more firms continue to enter the market competing for a finite number of deals.

Let’s do a quick cost comparison using a sample firm for reference below:

The firm

Regional, 3 Managing Directors, industry agnostic M&A firm operating in Texas and surrounding areas.  The firm has been in business 15 years and takes on approx 14 client engagements each year.

The need

Each MD is required to generate their own deal flow and manage the clients they bring to the firm.  That said, they have less time to manage the deal prep and back office functions. These back office needs include: Prospect list compilation, buyer research, occasional financial modeling, industry reporting etc.

Internal costs

Historically, the firm has handled research in-house, carrying the following expenses:

  • 1 seat enterprise data tool – 2.5k per month
  • 1 research analyst with 4 years of experience – 5k per month base + incentive and benefits
  • Training, equipment, and overhead costs

Fully loaded the firm has paid as much as 102k per year to support its back office needs

Pros:

  • Opportunity to grow internal talent base

Cons:

  • Long term commitment to costs leaves little flexibility
  • The firm spends money on training up employees only to have them leave a few years later
  • Access to only 1 data source
  • To scale, the firm must hire more analysts and buy more tools

CAPTARGET costs

  • $1500 per month, committed on a month to month basis

Note; there is no requirement to purchase annually, however annual costs of 18k are 80% less than internal options.

Pros:

  • Short term commitment basis – total flexibility
  • Ability to scale up and down without disrupting your day to day processes
  • Access to more data tooling
  • Low turnover means you are not constantly working with new analysts

Cons:

  • Managing remote work involves some effort from Managing Directors, but at an 80% savings the cost of this involvement is nominal

 

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