Common Advisors in Mergers and Acquisitions: Determinants and Consequences

Posted: 18 Jul 2013

See all articles by Anup Agrawal

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

Date Written: July 2013

Abstract

This paper examines the determinants of merging firms’ choice of a common or separate M&A advisor, and the consequences of this choice on several deal outcomes. We analyze a large sample of acquisitions and account for the endogenous choice of common or separate advisors. We find that common advisors are generally chosen in economically sensible ways. After controlling for other variables, deals with common advisors take longer to complete and provide lower premiums to targets. We also find some evidence of lower target valuations and higher bidder returns in such deals. While there is no significant difference in overall quality between deals with and deals without common advisors, our evidence that deals with common advisors turn out to be somewhat better for acquirers than for targets favors the conflict of interest hypothesis over the deal improvement hypothesis about the role of common advisors. We find no evidence that merging firms avoided sharing advisors during the 1980s, but strong and growing evidence of such avoidance over the following two decades.

Keywords: Mergers, Acquisitions, M&A Advisors, Merger Advisors, M&A

JEL Classification: G24, G34, K22

Suggested Citation

Agrawal, Anup and Cooper, Tommy and Lian, Qin and Wang, Qiming, Common Advisors in Mergers and Acquisitions: Determinants and Consequences (July 2013). Journal of Law and Economics, Vol. 56, 2013, Available at SSRN: https://ssrn.com/abstract=2295005

Anup Agrawal (Contact Author)

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

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

HOME PAGE: http://aagrawal.people.ua.edu/

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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