Does Hiring M&A Advisers Matter for Private Sellers?
56 Pages Posted: 26 Feb 2014 Last revised: 21 Dec 2021
Date Written: December 20, 2020
We examine the determinants and deal valuation consequences of private sellers’ choice of hiring M&A advisers or top-tier advisers. Advisers can find and negotiate better deals for sellers, but hiring them entails fees and potential agency costs. Using a novel, hand-collected dataset on the hiring of target advisers for a large sample of M&A deals from several sources, we find that private sellers use advisers or top-tier advisers when the potential valuation benefits from doing so are greater. After accounting for this selection effect, we find that hiring advisers and top-tier advisers have positive effects on deal valuations. We find some evidence that acquirers’ announcement returns are lower in deals where private sellers use advisers. Our findings suggest that M&A advisers, especially top investment banks, can find and negotiate better deals for private sellers.
Keywords: M&A, Private Targets, M&A Advisers, Acquisition Premium
JEL Classification: G24, G34
Suggested Citation: Suggested Citation