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At risk, sure. Anything that has multiple providers is at risk. At risk to the same degree as audit. Absolutely not. Audit is a regulatory requirement where as deals is not. Typically required for lending but also a value add into what historical #’s look like on a run rate basis. Time line is significantly different and required capabilities is not the same.
No input from our A&M friends? wait, let me ping them…..”comp” “bonus”
Mentor
Someone said comp?
The same thing could be said about investment banking and many other services though. Why do you think places like goldman and investment banks are giving out smaller bonuses, markets have tanked and so have investment banking fees. If anything the downward pressure on lucrative investment banking fees have been hit harder than FDD. Sometimes it’s a good thing to be more of a commodity especially in a down cycle. I know some banks that basically gave associates no bonus and their base was slightly less than a FDD experienced manager. Super sad for they hours they put in.
Those big deals who want big 4 brand on their reports will always be there.
There’s been fee pressure for years and many view FDD like a commodity. Most of your small and MM FDD shops are cranking out QOE reports with zero value add for clients who are looking for a CYA report to file away. Sadly some of the B4 do the same.
I refused to deal with clients who were looking to pigeon hole us and only wanted to spent $50k on diligence. If that’s what you want or if you think DD is having me review audit working papers, then go elsewhere. My staff and I have more important things to do.
It can run the gamut but in general it requires your clients to view you as a true advisor, involve you in business discussions, have you read the SPA, look to you on how to structure the transaction (earn outs, pegs, etc). I worked on a carve out recently and my client was assuming normal NWC would be left in the business but that wasn’t the case because most of the historical liabilities, as well as AR, was not separately allocated to the business. So when the seller proposed they’d retain historical AR and AP my client would have been left with a huge NWC deficit which they didn’t realize.
Subject Expert
Definitely is. I think mostly for less complex deals or smaller deals though which is why firms like Riveron, BRG and such. I don’t see firms wanting to pay big4 rates for deals that have very little risk or smaller sized ones, the difference in value between firms I honestly believe is marginal at a certain point.
What are more value-add services that someone in FDD could pivot to to make more money?
F
I heard from a partner that there's a downward pressure. But we are charging based on the hours and we are advised not to eat any hours especially these days. I think we are seeing more sell side work because of that..
Typically our clients in the mid market will just put out an RFP for FDD providers and go with B4 only if their fee isn’t insanely higher than RSM / A&M. RSM already is charging very low prices, so it’s not uncommon for people to just go with one of the non-B4 firms