Why can’t investment banks take on small deals in India?
SME investment banking has a cost problem. Fees usually track deal value, but the work tracks complexity, preparation and the effort of finding the right counterparties. Smaller mandates often can’t support a conventional team. A different operating model can change that without treating professional judgment or client relationships as expendable.
This piece is written for CAs, company secretaries and boutique investment bankers who represent clients. It looks at what a banking team costs in India, the UK and the US, walks through a transparent fee model, and works a smaller mandate through it. Throughout, published evidence is kept separate from illustrative business economics.
At a glance
- ₹28–45 lakh: the annual base-salary range for M&A associates at domestic financial institutions, according to Michael Page’s 2026 India guide. Bonuses and incentives are excluded (Michael Page, 2026).
- ₹3 crore: annual compensation for the illustrative five-person Indian team. It’s a constructed budget, not an industry average (the Deal Network, 2026).
- ₹150 crore: the deal value that team needs at a 2% fee, two expected completions and a 25% target operating margin. Zero-profit break-even is ₹112.5 crore (the Deal Network, 2026).
- More than 8.7 crore: combined Udyam and Udyam Assist registrations reported for June 2026. That is a registration count, not a count of businesses looking to transact (Press Information Bureau, 2026).
1. Why doesn’t a smaller deal mean proportionately less work?
Take some made-up numbers. At a 2% advisory fee, a ₹20 crore sale earns ₹40 lakh and a ₹200 crore sale earns ₹4 crore. The fee is ten times larger. The work isn’t.
Both mandates may need financial preparation, a valuation, a reasoned buyer list, confidential disclosure, offer comparison and negotiation. A small company with unclear ownership or shaky information can take more attention than a larger, well-prepared one. Size alone doesn’t set the workload.
For the advisor, the question is whether the expected income justifies the time, resources and uncertainty involved. For the client, it’s whether the service and fee suit the transaction. The two questions are related, but they aren’t the same.
So a good business can be a poor fit for a particular banking team without being unattractive to buyers. It may need a different advisor, a better-prepared mandate or a narrower first engagement, rather than a lower valuation.
2. What does a banking team cost in India, the UK and the US?
It helps to start with roles rather than a single “average banker” salary. Michael Page’s 2026 guide puts base salaries for domestic M&A associates and VPs at ₹28–45 lakh and ₹45–85 lakh. Multinational banks pay ₹55–90 lakh and ₹100–150 lakh for the same two levels. These are base salaries, not total compensation (Michael Page, 2026).
For London, Dartmouth’s summer-cycle report gives roughly £98,000 in total compensation for first-year analysts, based on its 2024 observations. Prospect Rock’s public summary of 2025 pay reports US$160,000 for first-year analysts, and US$255,000 base and US$250,000 bonus components for VP1s (Dartmouth Partners, 2025; Prospect Rock Partners, 2026).
These figures come from different samples and periods, so they aren’t a matched international payroll dataset. They are useful reference points, but they don’t justify treating every bank, or every seniority level within a title, as equivalent.
The numbers below are made up. The table shows rounded annual compensation budgets for a team of two analysts, two associates and one vice-president. They include assumed bonuses but leave out employer costs and other overhead.
| Role / annual budget | India: domestic-team example | UK: London-team example | US: banking-team example |
|---|---|---|---|
| Analyst, each | ₹30 lakh | £100,000 | US$175,000 |
| Associate, each | ₹60 lakh | £200,000 | US$325,000 |
| Vice-president | ₹1.20 crore | £300,000 | US$500,000 |
| Total for five people | ₹3 crore | £900,000 | US$1.50 million |
This is a relatively well-paid Indian domestic team, not the cheapest practice you could run. Each budget is in local currency, which avoids an unstated exchange rate. The table compares operating structures; it isn’t a like-for-like measure of any national pay premium.
3. How does the Indian example produce a ₹150 crore hurdle?
A fee model needs four separate inputs: compensation, other operating expenses, the profit margin you want and the number of completed transactions.
Assume ₹3 crore in compensation and ₹1.5 crore in other annual expenses. The second figure covers employer costs, allocated senior origination support, premises, systems and administration, with no salary counted twice. That makes total operating cost ₹4.5 crore. To earn a 25% operating margin, the practice needs ₹6 crore in revenue (₹4.5 crore divided by 75%).
Next, assume two mandates running at once, each occupying capacity for an average of six months. That’s four mandates processed a year, which does not mean four successful transactions. At an assumed 50% completion rate, the practice can expect two completions.
| Step | Illustrative calculation | Result |
|---|---|---|
| Annual team compensation | Role budgets above | ₹3 crore |
| Additional operating expenses | 50% of compensation | ₹1.5 crore |
| Annual operating cost | ₹3 crore + ₹1.5 crore | ₹4.5 crore |
| Revenue for a 25% operating margin | ₹4.5 crore ÷ 75% | ₹6 crore |
| Annual mandates processed | 2 concurrent × 12 ÷ 6 months | 4 |
| Expected completed transactions | 4 × 50% | 2 |
| Required fee per completion | ₹6 crore ÷ 2 | ₹3 crore |
| Deal value at a 2% fee | ₹3 crore ÷ 2% | ₹150 crore |
The core equation is: required deal value = annual revenue requirement ÷ expected completions ÷ fee rate.
This assumes a steady flow of similar mandates. Occupancy has to reflect both the deals that close and the ones that don’t, and calendar time doesn’t automatically translate into professional hours. A stalled assignment might use very little capacity, while intensive diligence might use far more.
For the same practice, zero-profit break-even is ₹112.5 crore, not ₹150 crore. Running the same illustrative assumptions on the UK and US budgets gives target-margin deal values of £45 million and US$75 million. None of these is an observed national minimum.
4. What makes a smaller mandate commercially viable?
The hurdle falls when the practice needs less revenue per successful transaction. That can come from a smaller cost base, better throughput, a higher fee, or income earned for defined work before completion.
| Change from the Indian example | Required deal value |
|---|---|
| Base case: 50% completion rate, 2% fee | ₹150 crore |
| Completion rate rises to 65%; other inputs unchanged | About ₹115 crore |
| Completion rate rises to 80%; other inputs unchanged | About ₹94 crore |
| Fee rises to 3%; completion rate stays at 50% | ₹100 crore |
| Fee rises to 5%; completion rate stays at 50% | ₹60 crore |
| Compensation halves; expense and margin ratios unchanged | ₹75 crore |
| Average capacity occupancy rises from six to nine months | ₹225 crore |
The 2% fee is a modelling choice, not a rule. Firmex’s overview of its international survey describes upfront and monthly work fees, success fees and varying crediting practices. That is useful context for fee design, but it doesn’t tell us what Indian fees look like (Firmex, 2025).
Funding a whole practice is also different from taking on one more mandate. A bank with spare capacity may accept work below its average-cost hurdle if the expected contribution is attractive and the work doesn’t crowd out better mandates. The ₹150 crore figure can’t settle that decision on its own.
Finally, expected revenue isn’t guaranteed cash flow. Two expected completions don’t mean two will close every year, and delays, failed deals and slow collections all matter even when the average economics look fine.
5. What do India’s MSME numbers actually tell us?
They tell us how broad the enterprise population is, not how much transaction demand is ready to be served. The Press Information Bureau reported more than 8.7 crore combined Udyam and Udyam Assist registrations as of June 2026. That is a dated registration count, not a current inventory of sale-ready companies (Press Information Bureau, 2026).
The classification needs care too. Since 1 April 2025, a micro enterprise has been capped at ₹2.5 crore of investment and ₹10 crore of qualifying turnover. Both criteria matter. Classification isn’t based on enterprise value, meaning the value of the operating business (Ministry of MSME, 2025).
So it would be wrong to claim that some share of registered MSMEs lacks M&A advice, or to turn every registration into an acquisition target using a single profit margin and valuation multiple. A registration says very little about what the owner wants, what earnings can be transferred, or whether a buyer has any strategic interest.
For a real mandate, the filters are much narrower: a genuine transaction objective, credible financial information, a workable ownership position, and counterparties who have both a reason and the ability to act. Helping those clients is a clearer commercial goal than claiming to serve every small business.
6. How can the CA and banker work together without duplicating effort?
The opportunity is to combine an existing client relationship with capabilities the relationship alone may not provide. A CA who knows the promoter can clarify objectives and prepare reliable information. A banker can add sector knowledge, counterparty access and process management. Responsibilities should follow competence, permitted scope and the engagement, not job title.
| Workstream | CA / client-side advisor | Boutique investment banker |
|---|---|---|
| Define the mandate | Clarify objectives, ownership and constraints | Test transaction routes and counterparty fit |
| Prepare information | Reconcile numbers and explain adjustments | Build the investment case and outreach materials |
| Find counterparties | Contribute relationships and client context | Build and qualify a wider buyer, investor or lender universe |
| Compare offers | Assess financial, tax and client implications | Compare structure, conditions and execution risk |
| Coordinate execution | Support client decisions and information flow | Coordinate outreach, diligence and negotiations |
A professional network makes this division practical by extending the reach of the advisor who already holds the client relationship. The test is whether it produces suitable counterparties and real progress, not how many contacts it lists.
7. Worked example: how can a ₹50 crore sale fit a specialist practice?
The numbers below are made up. They illustrate a seller mandate. This is not a completed transaction or a recommended valuation.
Assume annual revenue of ₹50 crore and a sustainable EBITDA margin of 20%. EBITDA (earnings before interest, tax, depreciation and amortisation) comes to ₹10 crore. At an assumed valuation of five times EBITDA, enterprise value is ₹50 crore. Subtracting ₹4 crore of net debt leaves ₹46 crore of equity value, before other adjustments and transaction costs.
A 2% fee on enterprise value comes to ₹1 crore. A practice relying on two such completions a year would earn ₹2 crore, far short of the ₹6 crore revenue requirement from earlier. That doesn’t mean the larger bank must turn this down as an extra assignment. It does mean this book of business can’t fund that operating model.
Now consider a specialist practice with ₹60 lakh in annual professional compensation, including fair pay for the owner’s time. Adding 50% for other expenses puts operating cost at ₹90 lakh, and a 25% target margin requires ₹1.2 crore of revenue.
Two ₹50 crore completions at the same 2% fee bring in ₹1 crore each, or ₹2 crore a year, which clears the target. The smaller practice still has to show it has the capacity and expertise to deliver. The example doesn’t assume the work disappears, or that an existing client relationship is free.
The business itself hasn’t changed in value. The operating model now fits the mandate. Separate legal, tax, CA and other professional work sits outside this banking-fee calculation, and the client needs to budget for it. The fee here is based on enterprise value, not the seller’s equity proceeds.
8. Why does discovery matter alongside faster execution?
A financial model can assess a business, but it can’t produce a buyer with capital, strategic interest and the authority to transact. An introduction without reliable information or competent execution doesn’t become a completed deal either.
Good discovery goes beyond a sector label. A buyer may want manufacturing capacity, a distribution route or access to a new geography. A seller may care about keeping some ownership, continuity for employees and certainty of payment. Counterparty selection should reflect those goals.
Having several credible alternatives helps a client compare terms and avoid depending on a single conversation. It doesn’t guarantee a competitive auction or a higher price, since the parties still have to be informed, interested and able to complete.
The same discipline applies to AI. The numbers below are made up. Suppose document preparation takes 25% of total hours and a tool halves that task. Total hours fall by 12.5%, not 50%, and payroll doesn’t fall automatically. Saved time creates value only when it cuts a real cost, improves quality or frees capacity that can be put to productive use.
The opportunity isn’t a choice between execution and discovery. It’s improving the whole process: reliable preparation, qualified mandates, suitable counterparties and accountable follow-through. A platform’s effect on completion rates or professional hours has to be measured rather than assumed from the technology behind it.
9. How should advisors qualify, run and price the mandate?
Start with the decisions that can stop an unsuitable process before it eats up months. The sequence below is a suggestion, not a promised transaction timetable.
| Stage | What to establish before moving on | Failure it helps prevent |
|---|---|---|
| Qualify | Promoter authority, objectives and realistic expectations | Work on a mandate that cannot be authorised |
| Prepare | Reconciled earnings, ownership and material liabilities | Surprises that undermine offers during diligence |
| Approach | Consent, controlled disclosure and a reasoned counterparty list | Confidentiality breaches and irrelevant outreach |
| Compare and execute | Funding evidence, conditions, responsibilities and decision dates | Mistaking interest or headline price for an executable offer |
A readiness assessment can reasonably come before full execution. The client should understand what they’re paying for at each stage, who is responsible, and what additional work could change the budget. A polished presentation is no substitute for an authorised, commercially realistic mandate.
Engagement letters should set out the fee base, the payment triggers and how any retainer is treated. A work fee credited against the completion fee is not extra income on a successful close. The agreement should also cover deferred consideration, reimbursable expenses and any work outside scope. Without that, a simple-looking percentage can describe very different commercial arrangements.
Each advisor should be engaged and paid by the client for their own scope. For CA work, fixed fees, retainers and payments for defined deliverables keep that scope explicit. The 2026 ICAI Code also expressly permits contingent fees for non-assurance services to non-audit clients. That shouldn’t be mistaken for permission to provide prohibited services to audit clients, so check each engagement against the current Code and applicable law (ICAI, 2026a; 2026b).
Not every smaller deal will support a traditional team. What matters is finding the combination of preparation, professional expertise, suitable counterparties and commercial terms that serves this client responsibly.
Common mistakes
- Turning a scenario into a market fact. ₹150 crore is the output of one model. It isn’t a universal minimum or a measure of the advice gap.
- Confusing activity with income. Mandates, introductions, offers and collected completion fees are all different stages.
- Cutting fees without changing delivery. The scope, capacity, costs and the client’s total professional budget still have to add up.
Frequently asked questions
Is there a minimum deal size for investment banking in India?
This analysis doesn’t point to a single minimum. It depends on the practice, the mandate, the fee structure and the available capacity. The funding requirement for a whole practice isn’t an automatic rule for accepting or rejecting one deal.
Is ₹150 crore the break-even in the example?
No. That figure includes a 25% target operating margin. Zero-profit break-even is ₹112.5 crore at the same 2% fee and two expected annual completions.
Are the country salary figures directly comparable?
Not directly. The published sources cover different samples and periods, and the team table uses explicit local-currency budgets rather than a harmonised estimate of national average pay.
Can a boutique advise on a ₹40–60 crore transaction?
The worked example shows how a smaller specialist practice’s economics could support one. Capability, workload, fee terms and the client’s other professional costs still need to be checked.
Does AI remove the need for investment bankers?
Nothing in the model suggests that. Automating a task can help, but the process described here still depends on reliable information, professional judgment, relevant counterparties and accountable execution.
Can a CA charge a contingent fee?
In some cases, yes. The 2026 Code expressly permits contingent fees for non-assurance services to non-audit clients. That doesn’t override the restrictions on prohibited services to audit clients, and it doesn’t settle the treatment of every engagement (ICAI, 2026b; Government of India, 2013).
Getting started
The Deal Network brings CAs, company secretaries, investment bankers, investors and lenders together on one platform, and members can connect with each other based on their profiles. For advisors representing smaller clients, it’s a place to build relevant professional relationships around a clearly defined transaction need.
Disclaimer
This article is for information only and isn’t investment, tax or legal advice. Rules and thresholds change, so confirm the current position for each deal. It doesn’t apply to audit clients: under Section 144 of the Companies Act, 2013, a company’s auditor cannot provide investment banking or investment advisory services to that company, its holding company or subsidiary company, whether directly or indirectly. CAs in practice must also follow the Chartered Accountants Act, 1949, the Chartered Accountants Regulations, 1988 and ICAI’s Code of Ethics (Government of India, 2013; ICAI, 2026b).
The Deal Network is a WhatsApp-first introduction platform that brings chartered accountants, company secretaries, investment bankers, investors and lenders together, and connects them with each other based on their profiles.
References
Dartmouth Partners (2025). Investment Banking Compensation Report: Summer Cycle, 2024 observations, printed pp. 4–5. Publisher-hosted report. Accessed 30 September 2026.
Firmex (2025). M&A Fee Guide 2024–2025 — Global Edition, public overview of an international sell-side advisory survey. Publisher overview. Accessed 30 September 2026. Full report not inspected; no Indian fee benchmark inferred.
Government of India (2013). Companies Act, 2013, section 144, consolidated text, printed pp. 103–104. India Code statutory text. Accessed 30 September 2026.
ICAI (2026a). ‘Revised Code of Ethics (13th edition)’, announcement, 30 May. Effective-date announcement. Accessed 30 September 2026.
ICAI (2026b). Code of Ethics, Volume I, 13th edition, printed pp. 91–93, Regulation 192 and Council decisions. Official Code. Accessed 30 September 2026.
Michael Page (2026). India Salary Guide 2026, Banking & Financial Services, p. 5. Report text inspected. Publisher guide page. Accessed 30 September 2026. Publisher-authored report accessed through a third-party copy; annual base pay excludes bonuses and incentives.
Ministry of MSME (2025). Udyam Registration: definition of MSMEs, pre and post 1 April 2025. Official classification. Accessed 30 September 2026.
Press Information Bureau (2026). ‘MSMEs: Engines of Growth in a Changing Economy’, 26 June. Dated official release. Accessed 30 September 2026.
Prospect Rock Partners (2026). Prospect Rock Partners’ 2025 IB Compensation Report, public summary, 14 March. Publisher summary. Accessed 30 September 2026. Summary inspected; paid full report not accessed.
The Deal Network (2026). Illustrative advisory-practice economics, second-pass review. Accompanying model, independent reconciliation and scenario tables. These are constructed examples, not an empirical survey or operating forecast.
About the author
Chetan Raju is a co-founder of the Deal Network.