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As this is my first post, I will not analyse a M&A transaction. I will do that in my next post. Instead, I will briefly talk about the effects of the entrepreneurial revolution and social media on the M&A industry from my own prospective.
You may be asking yourself this – What is the entrepreneurial revolution?
The entrepreneurial revolution is a time where people are setting up their own small businesses therefore becoming suppliers of goods and services to consumers and businesses in the economy. The video below by Daniel Priestley explains this concept.
Why does the entrepreneurial revolution and social media matter to the M&A industry?
The entrepreneurial revolution means that we will see investment bankers will leave their jobs and set up their own boutiques specialising in their own niche. They will provide the same services as the bulge brackets at a fraction of the cost compared to the latter. This means that the boutiques can bring in the same amount of revenue as a bulge bracket while carrying less fat. This also means fatter profit margins for the former. Since these specialists can serve their clients better within their own niche compared to a generalist bulge bracket this means that the latter will be in trouble unless they form partnerships with the former.
Social media is definitely changing the way how investment banks operate. We will see the investment bankers using social media to work together on transactions while still being subject to regulations. Prospectuses will be shared to shareholders and those interested in transactions. News of transactions would be posted after being vetted. Detailed analysis of transactions will be shared publicly. Therefore, the processes in the transactions will be more transparent.
Putting the above two together, bulge brackets and mid caps have slim down to cut costs dramatically so that they can be very profitable. Investment banks will have to be more open [as the regulations allow them to be and without adversely affecting the share price of companies] and more supportive of their clients and other stakeholders [I’m not saying that they not in the first place].