Banks didn't spend as freely for investment banking advice in 1994 as in the previous year.
As a percentage of total deal volume, banks that were sold paid 14% less in fees, partly because investment banks increasingly were called on only to write low-cost fairness opinions.
In 1993, investment banks received on average 0.57% of the total deal value for their services, but the figure dropped to 0.49% last year, according to SNL Securities.
These figures do not cover all mergers, because banks are not required to include adviser fees in merger filings.
Nonetheless, investment bankers agreed that fees had fallen because of intense competition to represent banks, and banks' continuing use of internal staff to arrange mergers.
Also, the deals in 1994 were on average smaller than in 1993, so the big-bang fees that often accompany megadeals were uncommon last year.
"Deal sizes are lower, there are fewer big deals, and the banks have added a lot of infrastructure, or their own M&A staff," said Hans Morris, director of financial institutions M&A at Smith Barney Inc.
"So they are basically seeking unbundled pricing, and what we need to do is see if we can add more value," he said.
Unbundled pricing means banks are asking for help on only specific parts of a merger, from fairness opinions to due diligence, and no longer accepting a general, or bundled, fee that covers all aspects of merger advisory.
When large banks do use an investment banker, they no longer rely on a single company, said another investment banker.
"What really drives the ability to get paid is in large part driven by the relationship with the company, and whether they really view you as a confidential adviser," he said.
As those relationships fray, fees decline, he added.
Where there were larger deals in 1994, however, fees were above average.
Citizens First Bancorp paid Keefe, Bruyette & Woods Inc. $3.5 million for advice on its $514 million sale to National Westminster Bancorp.
Salomon Brothers Inc. received $3.5 million for its advice to Anchor Bancorp as part of its merger of equals with Dime Bancorp, or 0.63% of total deal value.
Alex. Brown & Sons received $1.33 million for its advice to Commerce Bank in its $132.9 million sale to BB&T Financial Corp., or 1% of the deal's value.
Perhaps the best deal of the year, as far as investment banks go, belonged to Montgomery Securities Inc.
The San Francisco-based firm received $1.05 million from First Bancshares as part of the Louisiana bank's sale to First Commerce Corp of New Orleans. The fee represented a staggering 1.4% of the $75.3 million deal.
As a percentage, though, the prize belonged to Hovde Financial Inc., a small Washington, D.C.-based investment bank. Hovde received $570,000 for advising Home Federal Savings Bank in its $24.8 million sale to First Union Corp., or 2.2% of total deal value.
Small deals often generated the highest percentages, usually because the investment relationships are sounder with smaller institutions.
Not all small deals were bonanzas for advisers, however. Smaller deals are usually not complex, and therefore do not require complicated advisory services.
For example, Austin Associates Inc. received only $150,000 for its advice to Heritage Financial Corp. as part of its $75 million sale to Premier Bancorp, or 0.2% of the deal's value.
Most advisers agree fees will only get tighter this year as competition increases and more banks, familiar with the merger process, use their own staff to negotiate mergers.