Apohan Corporate Consultants Private Limited

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Payment Structure for M&A Consulting

Apohan Corporate Consultants Pvt. Ltd. > Why Apohan > Payment Structure for M&A Consulting

Payment structure:

Composition of consulting charges:

Apohan has divides consulting charges into the following components: 1. Mobilization fees or preparatory fees. 2. Milestone based charges against the submission of important deliverables. 3. Success fees upon signing of the investment contract. GST is paid extra on these basic fees. Specific expenses such as outstation travel, stay are undertaken with the prior approval of the client and reimbursed at actual as per the provisions of the Consulting contract.

Risk of M&A success based assignments:

In case of the SME companies, Apohan has to organise the information about the business model, unique attraction points about the investment, etc. It has create a documentation set from the scratch. The work required to be done for equity investment in a SME business is much more than the one in a large company. In the course of assignment, financial infrastructure about the company gets created. The final decision whether to take investment from investor or not is always the choice of the businessman and upon has no say in it other than making a recommendation. Business can use his submissions at any future point of time to revive the assignment or undertake a fresh assignment.

No small equity investments without retention fees:

In order to mitigate this risk, Apohan does not undertake any consulting assignment without payment of milestone based fees against the deliverables. Even the businesses in financial distress need to arrange payments other than success fees trusting the capability of Apohan to get them equity funding.

Affordable services

Difference between consulting for a large company and an SME:

There is a fundamental difference between carrying out merger and acquisition activity or any strategic consulting activity for a large organised company and a small and medium enterprise. The large companies have a dedicated finance department, adequate number of staff in the finance department, financial Software, financial compliances, documentation, reports. Moreover, in a large company, the fundamental concepts of the the chief financial officer or the Managing Director regarding strategic transactions are clear and the only work left for the consultants is execution of the assignment. The scenario is by far very different in a small and medium enterprises.

Effect of unsuccessful transactions:

Many companies in consulting sector charge of fees over and above their cost plus profit margin expectation. This is done in the same manner the banks charge excess interest rate to take care of unexpected level of non performing assets. The consulting companies generally expect that they would not receive the last milestone payment. This happens when the services are dis-satisfactory and there is hardly any probability of getting the last milestone payment due to client dissatisfaction. Apohan does not indulge in such kind of practices as it is confident of successful completion of the assignment which have been chosen very carefully. Also, Apohan’s assignments are of relatively small deal size & there is lesser probability of unforeseen factors playing spoilsport.

Requirement of additional document preparation:

In SME Business, Apohan has to prepare the exhaustive documentation required for equity funding. This includes, from among others, business plan, financial models, equity contracts, presentations, communication templates, etc. Apohan has to prepare meaningful reports addressing the concerns of the investors. A lot of time is spent in collecting the information scattered at various places in the company. Apohan has to organise the raw data of the company into meaningful information. Apohan has to provide strategic orientation to the management of the company about the process. It has to explain the relevance of various activities to the management in the language they can understand. Even the CAs & CSes are not familiar with M&A activity & they too need to explained the structure of work.

Size of deals:

In nutshell, the hardship required in strategic consultancy for SME businesses is much more than the the similar type of work for large companies. Moreover, the M&A consulting companies, investment Advisors, investment banks handle very large size of investments, usually more than rupees 300 – 500 crore, effectively reducing the fixed costs per transaction. Against this, the size of deal in a SME equity transaction would be relatively very small, typically ranging between Rs. 10 cr to 300 cr with an average value of Rs. 70 -80 Cr .

Affordable charges:

Despite this, Apohan charges are highly competitive looking at the quality and professionalism of the service which is at par with the one that is provided by the reputed investment banks to large publicly listed companies or MNC companies.

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M&A consulting payment structure