* M&A shakeup demands legal, accounting, PR fee disclosure
* Law firms can bill 10 mln pounds-plus on biggest deals
* Accountants’ fees typically about 60 pct those of lawyers
* Financial PR bills can reach 2 mln pounds
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By Quentin Webb
LONDON, Nov 10 (Reuters) - Changes to Britain’s takeover rules will throw light on the millions of pounds in legal, accounting and public relations fees charged by firms such as Clifford Chance, Deloitte, and Brunswick Group.
Fees paid to banks for advice, funding, and corporate broking can run into the tens or hundreds of millions of pounds and have long drawn criticism. They make up the majority of deal fees, but there can be a string of smaller bills to pay.
Britain’s Takeover Panel wants transparency in all areas. The panel last month unveiled a slew of proposed changes to the country’s merger and acquisition (M&A) regime, which includes publishing estimated fees, with separate figures for bankers, corporate brokers, lawyers, accountants and PR firms.
The new, wider focus should please critics such as Business Secretary Vince Cable, who vowed in September to shine “a harsh light into the murky world of corporate behaviour” and attacked the “cosy magic circles in auditing, law or investment banking”.
The watchdog’s proposal is part of a big shake-up that will also give potential bidders less time to put a full offer together, curb “break fees”, and require more detail on a bidder’s finances and funding. [ID:nLDE69K0UM]
Takeover fees can be huge: the Royal Bank of Scotland-led (RBS.L) consortium that bought ABN AMRO in 2007 paid about 175 million euros to banks, lawyers, accountants, printers and others, and 485 million more in funding fees. Even losing bidder Barclays (BARC.L) racked up a 100 million pound bill.
But what will the more detailed new disclosure reveal?
Freeman & Co, a consultancy, says UK takeovers of more than $1 billion can command investment-banking fees of up to 0.3 percent on each side, or about 15 million pounds on a 5 billion takeover, while hostile deal fees can be a quarter higher. For smaller deals the rates can be as much as 2.5 percent.
Banks usually make a second hefty fee from financing a deal, and the panel will require separate disclosure of these fees.
Tony Williams, a principal at Jomati Consultants, and a former managing partner of Clifford Chance, Britain’s biggest law firm by revenues, says a law firm could bill 2 million to 5 million pounds on a major M&A deal.
Williams said bills can top 10 million for the most complex, cross-border deals — those involving thorny pension issues, or assuaging competition watchdogs worldwide, for example.
An extreme example is mining giant BHP Billiton’s BLT.L failed 2008 bid for Rio Tinto (RIO.L) — a huge, hostile deal that posed major competition concerns. Slaughter and May billed BHP 20 million pounds for the bid, according to the Lawyer, a trade magazine, while Linklaters reportedly charged Rio 15 million.
Unlike banks, which mostly rely on success fees, lawyers and accountants have traditionally billed by the hour — as much as 650 pounds an hour for a top M&A partner, Williams says. But some top law firms now offer an all-in charge instead.
Accountants’ fees are typically about 60 percent of lawyers’, says Alan Hodgart, head of the global professional services team at Huron Consulting Group.
Firms such as Deloitte [DLTE.UL], the world’s biggest accountant by revenue, undertake due diligence work to assess the target company and other number-crunching.
Firms such as Brunswick, this year’s busiest PR adviser by M&A deal value, according to M&A intelligence service mergermarket, can also bill big.
One senior industry figure said PR firms can bill 1 million to 2 million pounds on a high-profile deal that requires lots of spin and counter-spin because it’s hostile or contested. A straightforward friendly deal could be worth a tenth of that.
Senior dealmakers disagree over whether the new system will spur advisers to undercut each other to win business, or might even drive fees up, as with top sporting salaries.
Peter Hahn, a lecturer in finance at Cass Business School in London, said the changes could encourage new arrangements — such as paying banks in shares, or lawyers abandoning hourly rates — to ensure advisers work for the benefit of the client’s shareholders.
“It’s hard to see with fees today that the advisers’ interests are aligned with shareholders’,” he said. (Reporting by Quentin Webb; Editing by Will Waterman) ($1=.6189 Pound)