Sealing the Deal: Is an Advisor’s Completion Expertise in Mergers & Acquisitions Value-Destroying?

Abstract

Existing evidence indicates that acquirers reward and therefore value the merger completion abilities of acquisition advisors. We examine whether the focus on advisors’ merger completion abilities is driven by acquirers seeking to complete mergers unconditionally, regardless of value implications, or if it is driven by value-maximization considerations. Advisors that complete a higher percentage of announced mergers are associated with more certain future merger completion. Results reveal that completion expertise has positive value implications, but only for acquirers with strong corporate governance. There is some evidence that completion expertise has negative value implications for acquirers with weak corporate governance. Results suggest that the level of corporate governance of the acquirer determines the value consequences of an advisor’s merger completion expertise.

Keywords: Corporate control transactions, mergers, acquisitions, investment banks, financial advisors, deal completion, corporate governance, anti-takeover provisions

JEL Classification: G24, G32, G34