Advisor Skill and Acquisition Performance: Do Investment Bankers Make a Difference?

Abstract:     
Using a hand-collected dataset of investment banker turnovers between 1996 and 2006, we analyze the relationship between individual investment bankers and acquisition outcomes. We find that investment bankers have a statistically and economically significant association with announcement period returns, operating performance, and the long-horizon stock returns of the acquirer. Investment bankers also have a significant association with deal completion time. We find that there is persistence in the performance of deals associated with investment bankers across the different banks they are employed at. Further, deal performance of acquisitions advised by investment banks deteriorates after high performance fixed effects bankers leave the bank. Similarly, the deal performance of acquisitions advised by investment banks improves after high performance fixed effects bankers join the bank. Bankers with Ivy League graduate degrees and MBA degrees are associated with better long-run acquirer performance. However, the effect of MBA degree on deal peformance disappears when we control for education-based connections between the bankers and the acquiring firm’s senior management and directors. MBA degree connections are positively associated with performance. Further, the association between Ivy League non-MBA degrees of bankers and performance continues to exist even after controlling for educational connections. Our results suggest that the investment banker skill and connections may be important channels through which bankers are associated with deal performance.

Number of Pages in PDF File: 46

Keywords: M&A, Investment Bank, Banker, Acquisition performance

JEL Classification: G24, G34

working papers series