The Role of Traditional Banking in M&A
Investment banks and large financial institutions have historically been the main advisors in mergers and acquisitions. However, their business model is based on multiple revenue streams: financing, advisory, debt placement, and equity issuance. This creates structural conflicts of interest, as they may recommend transactions that benefit their own balance sheets or preferred clients rather than the interests of the company they are advising.
The Hidden Cost of Conflicts of Interest
- Biased Valuations: PwC Peru reported that more than 56% of corporations surveyed in 2025 acknowledged that external criteria such as ESG and market pressures influence transaction valuations, which can distort the real price of assets.
- Cross-Commissions: Banks may structure the transaction in a way that generates additional income from financing or debt placement, raising the total costs of the operation.
- Reputational Risk: Recent cases in Latin America show that when a bank advises both parties or simultaneously finances competitors, the perception of impartiality erodes, undermining market confidence.
- Opacity in Negotiation: Traditional banking often centralizes information, limiting transparency for buyers or sellers and creating asymmetries that favor the bank.
Implications for Investors and Corporations
Conflicts of interest in M&A not only increase transaction costs but can also compromise the long-term strategy of companies. A poorly structured acquisition, based on biased valuations, can destroy value instead of creating it. In addition, regulatory risks increase: in markets such as Peru and Colombia, financial supervisory authorities have intensified oversight of operations with potential conflicts of interest.
The Independent Alternative
The hidden cost of traditional banking has driven the rise of independent boutique firms, which provide conflict-free advisory services with direct access to institutional networks. These firms, such as Belo Partners, lead M&A processes with absolute impartiality, ensuring that strategic decisions align with the interests of clients rather than the balance sheets of a bank.
Conclusion
Conflicts of interest in traditional banking during mergers and acquisitions are a latent risk that can translate into hidden costs, distorted valuations, and loss of trust. For investors and corporations seeking to expand in Latin America, the key is to choose independent advisory services that guarantee transparency and strategic alignment. At Belo Partners, we act as trusted allies, leading M&A processes with absolute impartiality and protecting our clients’ assets. If you are considering a transaction in the region, we structure with you a clear and executable roadmap that eliminates friction and ensures real value in every operation.
FAQ
A: Traditional banks operate integrated business models involving financing, debt placement, and equity issuance. This structure creates scenarios where their internal balance sheet objectives and the pursuit of cross-commissions may conflict with the strategic needs and financial well-being of the client they are advising.
A: Misaligned incentives can lead to biased valuations. Institutional pressures to close deals or generate secondary revenue pools frequently distort asset pricing, moving it away from objective, technical analysis, which ultimately degrades the total transaction value.
A: Dual-mandate advisory—such as advising one party while simultaneously financing a direct competitor—severely undermines market confidence and perceived impartiality. Consequently, financial supervisors in jurisdictions like Peru and Colombia are increasingly scrutinizing operations characterized by these structural conflicts.
A: Independent boutiques offer uncompromised, objective counsel free from competing balance sheet pressures. This absolute impartiality ensures that every strategic recommendation and valuation model is aligned exclusively with protecting and maximizing the client’s capital.
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