The Role of Investment Banks in M&A Transactions: Fees and Services

49 Pages Posted: 31 Aug 2007

See all articles by Alfred Yawson

Alfred Yawson

University of Adelaide; Financial Research Network (FIRN)

Charles P. W. Yeung

Macquarie Bank; University of New South Wales (UNSW)

Terry S. Walter

University of Sydney; University of Technology, Sydney - School of Finance and Economics; Financial Research Network (FIRN)

Abstract

We examine the pricing and performance of advisers in M&A transactions. We determine adviser quality on the basis of a contemporaneous market share measure and show that high quality advisers receive higher M&A advisory fees. High quality advisers also complete deals faster, but their superiority is not reflected in increasing the likelihood of deal completion or delivering greater abnormal equity returns to their clients. It is well known that stock bids are received more negatively than cash bids, so we further partition the sample of acquirers by consideration type and examine the abnormal returns of each partition. We find that high quality investment banks are able to differentiate themselves by delivering greater abnormal returns to their acquirer clients in deals involving stock.

Keywords: Investment banks, Quality premium, Advisory fees, Stock bids

JEL Classification: G12, G24, G34

Suggested Citation

Yawson, Alfred and Yeung, Charles P. W. and Walter, Terry Stirling, The Role of Investment Banks in M&A Transactions: Fees and Services. Pacific-Basin Finance Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1005286

Alfred Yawson

University of Adelaide ( email )

No 233 North Terrace
Adelaide, South Australia 5005
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Charles P. W. Yeung

Macquarie Bank ( email )

Auckland
New Zealand

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

Terry Stirling Walter (Contact Author)

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

University of Technology, Sydney - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
+61 2 9514 3860 (Phone)
+61 2 9514 7711 (Fax)

HOME PAGE: http://datasearch.uts.edu.au/business/finance/staff/StaffDetails.cfm?UnitStaffId=5373

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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