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The Impact of Common Advisors on Mergers and Acquisitions

65 Pages Posted: 17 Mar 2011 Last revised: 22 Jun 2011

Anup Agrawal

University of Alabama - Culverhouse College of Commerce & Business Administration

Tommy Cooper

University of Alabama - Department of Economics, Finance and Legal Studies

Qin Lian

Portland State University

Qiming Wang

Willamette University - Atkinson Graduate School of Management

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Date Written: June 20, 2011

Abstract

We examine the conflict of interest that an investment bank faces when advising both the target and acquirer in a merger or acquisition (M&A) by investigating how common advisors affect deal outcomes. We compare M&As with common advisors to deals in which targets and acquirers use different advisors and account for the endogenous nature of this choice. We find that (1) deals with common advisors are less likely to be completed and take longer to resolve, and (2) sharing advisors does not affect the wealth gains of shareholders of targets, acquirers or the combined firm and the post-acquisition performance of acquirers. We find some evidence that valuation multiples paid for targets and deal premiums for public targets are significantly lower in transactions with common advisors, suggesting that common advisors tend to favor acquirers over targets, with an eye on future investment banking business from the larger, surviving firm. But most of our results suggest that common M&A advisors lead to neither better deal outcomes by facilitating information flow between targets and acquirers, nor worse deal outcomes by influencing both sides to hasten deal completion.

Keywords: Mergers, Acquisitions, Investment Banking, M&A

JEL Classification: G24, G34, K22

Suggested Citation

Agrawal, Anup and Cooper, Tommy and Lian, Qin and Wang, Qiming, The Impact of Common Advisors on Mergers and Acquisitions (June 20, 2011). Available at SSRN: https://ssrn.com/abstract=1787272 or http://dx.doi.org/10.2139/ssrn.1787272

Anup Agrawal (Contact Author)

University of Alabama - Culverhouse College of Commerce & Business Administration ( email )

Culverhouse College of Commerce
EFLS, Box 870224
Tuscaloosa, AL 35487-0224
United States
205-348-8970 (Phone)
205-348-0590 (Fax)

HOME PAGE: http://culverhouse.ua.edu/faculty/profile/4

Tommy Cooper

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Qin Lian

Portland State University ( email )

United States
5037253728 (Phone)

Qiming Wang

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States

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