Recapping: Termination fees and other non-“advance fees” in finance industry

We have previously covered the fact that there are many operational costs in the financial industry that are not an “advance fee” often mis-construed by some.

 

Termination fees by attempted buyers of Hooters Hotel-Casino in Las Vegas is 1 example of a non-advance fee.  Switzerland’s Tyco’s M&A of ADC Electronics in Minnesota had a termination fee clause as well.  Both of these are previously covered on http://www.free-press-release.com/news/print-1279231810.html.

 

The aborted M&A of T-mobile by AT&T in 2011 had a termination fee clause.  See how expensive it may be.
http://SinCityFinancier.posterous.com/3b-possible-termination-fees-in-ma-an-article

 

It has just been announced that Pinnacol Assurance has spent $3.5M in an attempt to go private.  Pinnacol Assurance is a Colorado State chartered workers compensation insurer.  The list of these costs in the privatization attempt includes; investment bankers analysis, lobbying, >public relations<, and legal services.  Ironically, we had previously identified legal services & PR services as 2 of at least 17 non-broker tasks in the financial services industry.  http://SinCityFinancier.posterous.com/if-all-it-took-to-get-approved-for-funding-wa

 

In 3/12, a http://www.Nevadabusiness.com feature article focuses on the Investment firm industry.  A Q&A  with a local Las Vegas registered investment advisor (RIA) replies that an RIA “acts like a CPA or attorney would work, and they are not a broker”.  Advisors of any kind tend to work on a flat fee or monthly basis and seldom a commission alone.  If a commission is included it is considered more of a bonus of 20% to the 80% fees & costs.

 

 

In 3/12, the back cover of the Asset-based Funding Journal  features the company Accuval.  The services offered by Accuval include not just financing but; financial reporting, tax management, litigation support, risk management, asset management, and business planning.  None of these are a broker task.

Investment banks coast to coast provide valuation, negotiations, and structuring in conjunction with raising capital.  Here are the typical service option steps.  http://www.free-press-release.com/news/print-1310851196.html

 

 

Barclays Capital is 1 of the Top 20 global private equity firm’s and owns 7% of the (TIPS) US Treasury Inflation Protection Securities.  Just like Pinnacol above…Analysis costs are just 1 of many that investment banks and P/E firms charge. Here is a quote from Barclay’s staff.
http://atomic-temporary-50435663.wpcomstaging.com/2010/08/04/reality-of-industry-sop-explained-by-barclays/  The dictionary describes a commission as “a percentage of a quantifiable sum”  Quantifiable means numerical. The sum of a transactional value. A broker task.  And most tasks in financial services aren’t.