Value Creation of M&A Advisors: A Bargaining Perspective

Type
conference paper
Date Issued
2023-06-16
Author(s)
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Abstract
Financial advisors are hired by both buyers and sellers and play an important role in the M&A process. However, our understanding of the extent to which they can help their clients achieve better acquisition outcomes is limited. In this study, we adopt a bargaining perspective to analyze the acquirers’ advisory team composition vis-à-vis the advisory team composition of the target company. To do so, we examine the impact of a quantity advantage (larger advisory team size) and quality advantage (larger amount of prior advisor experiences) on the negotiated acquisition premium and the resulting stock-market reactions upon M&A announcement. Our findings indicate that a quality advantage is associated with a lower acquisition premium and thus positive outcomes for the buyer, while a quantity advantage is linked to lower cumulative abnormal returns and thus negative outcomes for the acquiring firm.
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