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Law Firm Expertise and Mergers and Acquisitions

44 Pages Posted: 10 Aug 2009 Last revised: 16 Oct 2012

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); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Date Written: May 1, 2012

Abstract

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.

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

Suggested Citation

Krishnan, C. N. V. and Masulis, Ronald W., Law Firm Expertise and Mergers and Acquisitions (May 1, 2012). Journal of Law and Economics, Forthcoming; ECGI - Finance Working Paper No. 316/2011. Available at SSRN: https://ssrn.com/abstract=1443384 or http://dx.doi.org/10.2139/ssrn.1443384

C. N. V. Krishnan

Case Western Reserve University - Department of Banking & Finance ( email )

10900 Euclid Ave.
PBL 363
Cleveland, OH 44106-7235
United States
216-368-2116 (Phone)

HOME PAGE: http://weatherhead.case.edu/faculty/c-n-v-krishnan

Ronald W. Masulis (Contact Author)

University of New South Wales - Australian School of Business ( email )

Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Financial Research Network (FIRN)

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

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

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

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