Takedown (underwriting)
Also known as: total takedown, additional takedown
In a municipal bond underwriting, the takedown is the portion of the underwriting spread that a syndicate member earns for selling bonds. Total takedown equals the concession plus the additional takedown, and it is the largest piece of the spread.
When a syndicate underwrites a new bond issue, it buys the bonds from the issuer at a discount and resells them to investors at the public offering price. The difference is the underwriting spread, and the takedown is the share of that spread paid to syndicate members for distributing the bonds.
The spread breaks into three components. The management fee goes to the senior manager for organizing the deal and is usually the smallest piece. The underwriting fee compensates syndicate members for taking on risk. Everything left over is the total takedown. Total takedown itself splits into the concession — the amount a selling group member keeps when it sells a bond — and the additional takedown, which the syndicate member retains on top of the concession.
A simple example makes the layering clear. Suppose the spread on a municipal issue is $10 per bond: $1 management fee, $1 underwriting fee, and $8 total takedown. If the concession is $5, the additional takedown is $3. A selling group member that sells a bond earns the $5 concession; a syndicate member selling the same bond directly earns the full $8 total takedown.
The Series 7 exam tests this hierarchy in both directions — computing a missing component from the others, and identifying who earns what. Remember that selling group members are not syndicate members: they take no underwriting risk, have no financial commitment to unsold bonds, and therefore receive only the concession.
Key takeaways
- The takedown is the portion of the underwriting spread paid to syndicate members for selling bonds.
- Total takedown = concession + additional takedown, and it is normally the largest component of the spread.
- Underwriting spread = management fee + underwriting fee + total takedown.
- Selling group members earn only the concession because they assume no underwriting risk.