This is a million-dollar opportunity lost for investment bankers who could have earned up to $48 million in fees, if the proposed deal between Indian telecom major Bharti Airtel and South Africa's MTN had materialised.
Investment banks generally charge 0.5-2 per cent of the entire deal amount as advisory fees for the M&A transaction.
While the exact amount that investment bankers could have earned from Bharti-MTN deal could not be ascertained, it could have been up to 48 million dollars, based on the upper limit of potential fee income from the proposed $24 billion deal.
Bank of America Merrill Lynch and Deutsche Bank were advising MTN, while Standard Chartered and Barclays advised Bharti Airtel.
While a small portion of the fee income might have already gone to the pockets of bankers and financial advisors, they generally get bulk of the fees only after completion of the deal. However, lawyers and accountants, who work on fixed fees, would not suffer so much loss, experts said.
"Investment banks generally charge 0.5-2 per cent of the total deal amount but it would be difficult to give the exact figure that the investment banking community have lost in the Bharti-MTN deal," global consultancy firm PwC executive director Sanjeev Krishnan said.
Terming the collapse of the deal as 'unfortunate', Krishnan said that "the deal fell through largely because of the complex organisational structure of MTN. Though the management of both the companies were eager for the deal, there were hurdles from shareholders and regulatory authorities."
Echoing similar opinion, consulting firm Grant Thornton's M&A advisory head Pankaj Karna said "this deal is not likely to dampen India Inc's shopping spree. Every case is unique as long as fundamentals make sense, even large transactions are likely to get completed."
Though the Bharti-MTN deal can be termed as one of the largest failed transactions in history, but it is a one-off kind of situation and it does not question the outbound M&A story of corporate India and sentiment wise also it is not going to affect.
According to global deal tracking firm Dealogic, Asia Pacific, at present, accounts for more than 38 per cent of failed M&A globally, following high profile deals such as Chinalco's unsuccessful bid for Rio Tinto's assets collapsing, besides the Bharti-MTN deal.