BSkyB deal delay to cost City advisers millions

The army of advisers working on News Corporation's approach for BSkyB are in for a nervous summer after it emerged the Government was likely to delay its approval, as a multi-million pound payday is at stake if the deal is derailed.

Shares in BSkyB fell 2 per cent to 812p yesterday, as doubts over the deal rose. According to a senior banker who is not working on the deal, the uncertainty "will make a few people in the City very worried".

The bankers are estimated to be heading for a total payout of £85m, with the lawyers securing just under £70m, according to data drawn up by Thomson Reuters/Freeman. Yet the lion's share of fees in merger and acquisitions are dependent on whether the deal is completed.

"Advisers are paid a base fee but that is only a few thousand pounds," the banker said. "The real payment comes on completion."

There could be even more at stake, he added, depending on how the advisers were incentivised. He said the industry average for fees was set at about 4 per cent of the estimated value of the target at the close.

If News Corp is forced to bid 850p per share, valuing the whole group close to £9bn as estimated by analysts, the fees could go as high as £360m. This is complicated by News Corp already owning 39 per cent of Sky.

Complex deals such as this normally bring in multiple advisers. News Corp has called in Deutsche Bank, once a broker to Sky, and JP Morgan Cazenove, with the firm's head of UK investment banking, Charles Harman, on the deal. Its legal team consists of senior lawyers Michael Hatchard and John Adebiyi at Skadden, Arps, Slate, Meagher & Flom, as well as Cleary Gottlieb Steen & Hamilton and Allen & Overy's Don McGown.

BSkyB called in the Swiss group UBS, whose advisers on the deal are led by its European investment banking co-head Simon Warshaw, and Morgan Stanley, including its UK head of investment banking, Simon Robey. Cravath, Swaine & Moore and Herbert Smith are the legal counsel.

It emerged this week that investment banking fees are booming once again. The total sum paid for advisory work – which includes raising money as well as takeovers – in the first half hit $48.8bn worldwide, up 22 per cent on a year ago. It was the highest level since before the credit crunch.