Industry Expertise, Information Leakage, and the Choice of M&A Advisors
Xin (Simba) Chang
Nanyang Business School
University of Melbourne; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)
University of Macau
July 21, 2013
24th Australasian Finance and Banking Conference 2011 Paper
This paper examines the impacts of M&A advisor’s industry expertise on firm’s choice of financial advisors in mergers and acquisitions. We show that an investment bank's industry expertise increases its likelihood of being chosen as an advisor, especially in horizontal mergers, when the acquisition is more complex, and when firms have less prior acquisition experience. However, due to the concerns about information leakage to industry rivals through M&A advisors, acquirers are reluctant to share advisors with rival firms in the same industry, and they are more likely to switch to new advisors if their former advisors have advisory relationship with their industry rivals. In addition, we document that advisors with more industry expertise earn higher advisory fees and increase the likelihood of deal completion.
Number of Pages in PDF File: 42
Keywords: Investment banking, Mergers and Acquisitions, Advisory Fees, Advisory Services
JEL Classification: G24, G34, L11working papers series
Date posted: August 20, 2011 ; Last revised: July 30, 2013
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