Consultants as the players, bankers as the house: gaining competitive advantage in merger and acquisition advisory services

The unprecedented worldwide growth in the aggregate transaction value of mergers and acquisitions (M&A) has been accompanied by a concomitant increase in the advisory fees. Management consultants have challenged the status of banks in the latter's largely exclusive domain of M&A advisory services. Based on an in-depth inquiry into M&A decisions made by 27 medium and large-sized companies in Europe, the USA and Asia-Pacific, we investigate the decision-making processes used by bankers and consultants to undertake M&A advisory work. From the point of view of the financial services provider, we highlight the areas where banks have or can gain competitive advantage over consultants through the pricing mechanism, based either on contingency, fixed fees or a combination of both. We conclude that consultants may win from accepting M&A work in the short term but the long-term odds favour the banks.