Abstract
This paper investigates whether top-tier M&A investment bankers (financial advisors) create value for acquirers with different financial conditions in both the short and long term via analyzing 3420 US deals during 1990-2012. In this paper, deals are divided into three groups based on acquirer financial constraints - acquisitions by constrained, neutral and unconstrained firms. We find that the effects of top-tier bankers are dependent on acquirer financial conditions. Specifically, top-tier advisors improve performance for constrained acquirers rather than neutral, and unconstrained acquirers. Our results show that top-tier investment bankers improve constrained acquirers' short- (5 days) and long-term (36 months) performance by 1.45% and 24.27% respectively, after controlling for firm, deal and market characteristics. For deals with investment banker involvement, constrained acquirers advised by top-tier advisors have the lowest deal completion rate, and pay the lowest bid premiums; while unconstrained acquirers that retain top-tier investment bankers have the highest deal completion rate, and pay relatively high bid premiums. Our findings imply that constrained acquirers tend to retain top-tier investment bankers to gain superior synergy, while unconstrained acquirers appear to retain top-tier investment bankers to ensure the deal completion.
Original language | English |
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Article number | 105298 |
Number of pages | 15 |
Journal | Journal of Banking & Finance |
Volume | 119 |
Early online date | 6 Feb 2018 |
DOIs | |
Publication status | E-pub ahead of print - 6 Feb 2018 |
Keywords
- Mergers and acquisitions
- Investment Banker
- Financial Constraint
- Firm Performance