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When It Pays to Pay Your Investment Banker: New Evidence on the Role of Financial Advisors in M&As

60 Pages Posted: 10 Mar 2010 Last revised: 16 Nov 2011

Andrey Golubov

University of Toronto - Rotman School of Management

Dimitris Petmezas

University of Surrey - Surrey Business School

Nickolaos G. Travlos

University of Surrey; ALBA Graduate Business School

Date Written: November 15, 2011

Abstract

We provide new evidence on the role of financial advisors in M&As. Contrary to prior studies, top-tier advisors deliver higher bidder returns than their non-top-tier counterparts but in public acquisitions only, where the advisor reputational exposure and required skills set are relatively larger. This translates into 65.83 US$ million shareholder gain for an average bidder. The improvement comes from top-tier advisors’ ability to identify more synergistic combinations and to get a larger share of synergies to accrue to bidders. Consistent with the premium price – premium quality equilibrium, top-tier advisors charge premium fees in these transactions.

Keywords: Investment Banks, Reputation, Mergers and Acquisitions, Abnormal Returns, Advisory Fees, Deal Completion, Self-Selection Bias, Organizational Form

JEL Classification: G14, G24, G34

Suggested Citation

Golubov, Andrey and Petmezas, Dimitris and Travlos, Nickolaos G., When It Pays to Pay Your Investment Banker: New Evidence on the Role of Financial Advisors in M&As (November 15, 2011). Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1567370

Andrey Golubov

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Dimitris Petmezas

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

Nickolaos G. Travlos (Contact Author)

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

HOME PAGE: http://www.alba.edu.gr

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