Industry Expertise, Information Leakage, and the Choice of M&A Advisors

48 Pages Posted: 20 Aug 2011 Last revised: 16 Feb 2015

See all articles by Xin (Simba) Chang

Xin (Simba) Chang

Nanyang Business School, Nanyang Technological University

Chander Shekhar

University of Melbourne; Financial Research Network (FIRN)

Lewis Tam

Faculty of Business Administration, University of Macau

Jiaquan Yao

Jinan University - Management School

Multiple version iconThere are 2 versions of this paper

Date Written: February 15, 2015

Abstract

This paper examines the impacts of M&A advisors’ industry expertise on firms’ choice of advisors in mergers and acquisitions. We show that an investment bank's expertise in merger parties’ industries increases its likelihood of being chosen as an advisor, especially when the acquisition is more complex, and when a firm in M&A has less information about the merger counterparty. 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.

Keywords: Investment banking; Mergers and Acquisitions; Advisory Fees; Advisory Services; Industry Expertise

JEL Classification: G24, G34, L11

Suggested Citation

Chang, Xin and Shekhar, Chander and Tam, Lewis and Yao, Jiaquan, Industry Expertise, Information Leakage, and the Choice of M&A Advisors (February 15, 2015). 24th Australasian Finance and Banking Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1913001 or http://dx.doi.org/10.2139/ssrn.1913001

Xin Chang

Nanyang Business School, Nanyang Technological University ( email )

S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore

HOME PAGE: http://www.ntu.edu.sg/home/changxin

Chander Shekhar

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

Financial Research Network (FIRN)

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

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

Lewis Tam

Faculty of Business Administration, University of Macau ( email )

Room E22-4055, University of Macau
Avenida da Universidade
Taipa
Macau

Jiaquan Yao (Contact Author)

Jinan University - Management School ( email )

No. 601, West Huangpu Road
Guangzhou, Guangdong 510632
China

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