When It Pays to Pay Your Investment Banker: New Evidence on the Role of Financial Advisors in M&As

Golubov, Andrey; Petmezas, Dimitris; Travlos, Nickolaos G.

Abstract

We provide new evidence on the role of financial advisors in M&As. Contrary to prior studies, top-tier advisors deliver higher bidder returns than their non-top-tier counterparts but in public acquisitions only, where the advisor reputational exposure and required skills set are relatively larger. This translates into a $65.83 million shareholder gain for an average bidder. The improvement comes from top-tier advisors' ability to identify more synergistic combinations and to get a larger share of synergies to accrue to bidders. Consistent with the premium price–premium quality equilibrium, top-tier advisors charge premium fees in these transactions.

• Journal Article Type: Article
• Online Publication Date: Jan 17, 2021
• Publication Date: 2012-02
• Deposit Date: Aug 2, 2020
• Journal: Journal of Finance
• Print ISSN: 0022-1082
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 67
• Issue: 1
• Pages: 271-312
• DOI: https://doi.org/10.1111/j.1540-6261.2011.01712.x
• Public URL: https://durham-repository.worktribe.com/output/1265085