Does Hiring M&A Advisers Matter for Private Sellers?

54 Pages Posted: 26 Feb 2014 Last revised: 8 Dec 2018

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: November 20, 2018

Abstract

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 hand-collected dataset on the hiring of advisers for a large sample of M&A deals, 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

Agrawal, Anup and Cooper, Tommy and Lian, Qin and Wang, Qiming, Does Hiring M&A Advisers Matter for Private Sellers? (November 20, 2018). Available at SSRN: https://ssrn.com/abstract=2400531 or http://dx.doi.org/10.2139/ssrn.2400531

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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