Stephen Mayne noted in relation to Toll’s failed bid for Patrick
(19 January, Item 10), that takeovers are becoming “ridiculously
expensive” with both parties spending upwards of $20 million with
dozens of “lawyers and advisers” involved. Stephen, like many others,
is very quick to point the finger at lawyers for the high costs of
takeovers, largely exonerating the major culprits (who merely fall
within the “adviser” category) – investment bankers.

While defending how much lawyers charge is not far removed from
appearing in The Hague on behalf of Slobodan Milosevic, it has to be
acknowledged that while lawyers at top-tier firms are definitely not
“cheap,” compared to top-tier banks, they are an absolute bargain.

In a takeover defence that I worked on a couple of years ago, the
target ended up forking out around $19 million in fees. The lawyers
took home less than $1.5 million while the bankers collected around $17
million (for a comparable amount of work).

Also, while not a takeover, who can forget the infamous ALH float which
allegedly earned Macquarie upwards of $100 million? (The ALH
prospectus lists legal costs as being $3 million.)

Generally,
on
a large, fairly complex takeover or scheme of arrangement, lawyers will
charge around $500,000-$2 million. By contrast, bankers will not only
charge advisory fees, but also success fees (in the case
of a takeover defence) or underwriting/arrangement fees (in the case of
an acquisition with a simultaneous fund raising), often amounting to
more than $10 million.

In truth, given that the vast majority of mergers or acquisitions are not
earnings accretive, all the fees charged by lawyers and bankers are
ridiculous, but it is pretty unfair to point the finger at lawyers when
the vast majority of fees are being paid to bankers.