Law Firm Expertise and Merger and Acquisition Outcomes

Posted: 23 Jul 2012 Last revised: 31 Aug 2012

See all articles by C. N. V. Krishnan

C. N. V. Krishnan

Case Western Reserve University - Department of Banking & Finance

Ronald W. Masulis

University of New South Wales, Sydney; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Date Written: June 10, 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 and abilities to facilitate deal completions, while top target law firms have stronger incentives and abilities to help realize higher takeover premia, consistent with their respective clients’ objectives, than is the case for other law firms. Our findings suggest that law firm market share is an important omitted variable in current economic 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 control

JEL Classification: G34

Suggested Citation

Krishnan, C. N. V. and Masulis, Ronald W., Law Firm Expertise and Merger and Acquisition Outcomes (June 10, 2012). Journal of Law and Economics, Vol. 56, 2013, Available at SSRN: https://ssrn.com/abstract=2115819

C. N. V. Krishnan (Contact Author)

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

11119 Bellflower Rd
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Cleveland, OH 44106-7235
United States
216-368-2116 (Phone)

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

Ronald W. Masulis

University of New South Wales, Sydney ( email )

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

European Corporate Governance Institute (ECGI) ( email )

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Belgium

Financial Research Network (FIRN)

C/- University of Queensland Business School
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Queensland
Australia

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

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

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Singapore

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