Law Firm Expertise and Mergers and Acquisitions
C. N. V. Krishnan
Case Western Reserve University - Department of Banking & Finance
Ronald W. Masulis
University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN)
May 1, 2012
Journal of Law and Economics, Forthcoming
ECGI - Finance Working Paper No. 316/2011
Using a comprehensive sample of U.S. mergers and acquisitions (M&A) bids over 1990-2008, we document that top market share law firms are associated with a number of important bid outcomes and characteristics. Top bidder law firms are associated with significantly higher offer completion rates than other bidder law firms. In contrast, top target law firms are associated with significantly higher offer withdrawal rates than other target law firms. Top bidder and target law firms are both associated with significantly higher takeover premia than less prominent law firms. These associations are significant even after controlling for selection bias and major offer, bidder, and investment bank advisor characteristics. Our interpretation is that top bidder law firms have stronger incentives to facilitate deal completions, while top target law firms have stronger incentives to help realize higher takeover premia, consistent with their respective clients’ objectives, than other law firms. Our findings suggest that law firm market share is an important omitted variable in current models of M&A deal outcomes.
Number of Pages in PDF File: 44
Keywords: M&A legal advisor, Law firms, market shares, incentives, top 10 law firms, M&A, mergers, acquisitions, market shares, league table ranks, deal completion, takeover premium, selection bias
JEL Classification: G34
Date posted: August 10, 2009 ; Last revised: October 16, 2012
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