The underwriters and dealers get paid out of the proceeds of the issue offering. The public offering price is what the general public pays. This is the amount on the face of the prospectus. However, the issuing corporation receives a lower price than that from the managing underwriter. The difference between these two prices is the Spread.
Any firm participating in the underwriting is compensated out of the spread.
The amount of the spread is determined through a negotiation between the managing underwriter and the corporate issuer. However, there are certain parameters which are known to have taken place in previous underwritings and the negotiations take place around these. All members of the syndicate are paid out of the spread. The managing underwriter receives a fixed amount for each share which is sold. This is referred to as the managers fee.