Acquisition Fee

  

You thought the building cost a million bucks, but you forgot about acquisition fees. There was the commission, the bug inspection, the guy who crawled around the roof and under the building, looking at plumbing, pipes, and electrical wires, and another guy who stomped around the roof checking shingles.

You had closing costs, like filings you had to make with the city, and then final construction inspection fees, and other random fees, like the "coffee bar access" fee, and you didn't realize that egress down the hall into the corporate washroom with the fountain cost another five grand. But what could you do? Just hold it all day?

Acquisition fees are some form of commissions, and are just leakage on top of the purchase price of things you can buy.

Related or Semi-related Video

Finance: What Does an Investment Banker ...450 Views

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finance a la shmoop - what do investment bankers do? well they sell money, sorta.

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that's what they do sell money and you might guess there are a good jillion

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different things that happen inside of an investment bank. but when most people [people fly inside fancy bank]

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ask this question they're referring to corporate finance division investment

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bankers who raise money for companies. you know they sell companies and they do

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other big fat financial strategy for well big fat companies and yes they earn

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big fat paychecks too. the easiest way to think about the line job of an [woman waves check]

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investment banker is to think about a realtor. they dress nice they knock on

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your door they fill your wallet with business cards, and then they ask to sell

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your home. if they do they get a five or six percent commission for their trouble, [man holds cards]

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or rather the total Commission is about five or six percent with about half of

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that amount going to the buyer's agent and about half going to the agent who

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listed the home for sale or rather their agency. well a home might sell for five

01:01

hundred grand and five percent of that is 25k so each side might get something

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like 12 grand and change. the individual realtor who sold it might keep half that [chart with numbers shown]

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amount in their pocket in bonus money paid quarterly or however the local

01:15

players pay it. while bankers aren't all that different they might charge 1% for

01:20

selling a company like think selling GoPro to Apple for five billion dollars.

01:26

but that 1% is a big number! not many homes sell for five billion bucks. so the [camera and apple logo displayed]

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banks get 1% in commission or a total pot of fifty million dollars which is

01:38

generally also split by both sides. that's 25 million bucks paid to each

01:43

side for the time of half a dozen professionals a hundred or so hours of

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lawyer time some legal filings submitted to the government and a few other small

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things, but that's it. ever been in the lobby of goldman sachs yeah nice work if [man holds tray of champagne]

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you can get it. so how do you get it well you start off being good at math in

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college get really good grades and go to an Ivy League school pretty much because

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most the bankers come from Harvard Yale Princeton Stanford and just a few others. [man stands in front of white board]

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you take a bunch of econ courses and hopefully have half a clue about

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how to work a spreadsheet. then you get signed by one of the big banks into

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their analyst program where you will analyze stuff- acquisitions mergers IPOs

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LBOs we do the math behind who gets what on

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each of those. if you're good you get promoted and become a master of the [frowning woman smiles]

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PowerPoint. it'll be you and you alone in charge of producing spiffy presentations

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to clients who would in theory happily pay your exorbitant fees in return for

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making even more money from buyers sellers and Wall Street in general. if

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you're good at presenting PowerPoint then you'll gradually gain the attention

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and respect of clients .it'll be you who reaches out and asks clients that is [woman smiles]

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CEOs and CFOs of large public companies generally speaking about this deal in

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that deal and every other strategic financial move in between as you're

03:02

trying to sell them smaller companies and of course you get to know the

03:06

smaller company CFOs and CEOs as well and they tend to return phone calls [group of people waves]

03:10

little quicker. all right well if clients actually start relying on you to guide

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them financially then you become a vaunted managing director, who is then

03:18

responsible for a book of business that is, you'll cover an industry like oil or

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gas or transportation or media telecommunications technology stuff like [various technology shown]

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that. and you'll be responsible for the banking fees your bank would get inside

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of that vertical .well your competition wins three deals in a row over you?

03:39

ah, go back two steps do not pass go do not collect two million dollar annual

03:43

bonus. but if you do become a player in the space get lots of clients to do [man in vintage library]

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business with your bank in various forms including having your bank manage their

03:51

newfound wealth after the IPO then you begin to exhale

03:56

that is multi million dollar bonus checks stock options in the bank itself-

04:01

like you become a partner- a big fat expense account, and a fear loathing and [smiling man]

04:05

adulation of your partners at the bank for whom you are paying the very

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expensive rent and light bills all. of this comes at a price

04:13

stress levels in Investment Banking are high. divorce lawyers feast on investment

04:19

banker fees and only a small handful of jobs which you [hands feed man money]

04:22

would actually want are available to a highly competitive select group of

04:26

people at any one time. but stay in the game long enough kissing client butt with

04:31

gusto and while you make serious bank. like 50 to 100 million dollars in a

04:37

career. maybe more .and all this as you dream about doing well pretty much

04:43

almost anything else because at some point [man skis]

04:46

kissing client butt it gets old real fast. yeah you'd much rather be the client.

04:50

right, well the good news is you can retire young if you want to. and then you

04:55

won't get to do anything else. you might be the oldest extreme snowboarder [man carries snow board]

05:00

out there on powder, but you know, you do you.

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