Download This PaperDone Deal! Do Financial Advisors Create Value in Mergers & Acquisitions?
43 Pages Posted: 3 Feb 2021 Last revised: 21 Apr 2023
Date Written: March 22, 2023
Abstract
We study the role of financial advisors in M&A for different advisor engagement constellations. We observe positive effects of both target and acquirer advisors on deal completion and prices. The unexpected positive price effect of acquirer advisors is further supported by evidence for lower announcement bidder returns, indicating value destruction for their clients. We establish causality of pricing effects using matching and instrumental-variable approaches, making use of the impact of Lehman’s collapse on former Lehman clients. We offer an explanation in terms of governance: advisors’ and executives’ incentives form a potential source of value destruction.
Keywords: Mergers & Acquisitions, Financial Advisors, Transactions, Governance
JEL Classification: G24, G34, G41
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