Accounting Firms in the M&A Advisory Market

Posted: 27 Nov 2015 Last revised: 21 Oct 2020

See all articles by Pawel Bilinski

Pawel Bilinski

City University London - Sir John Cass Business School

Andrew Yim

Cass Business School, City, University of London

Date Written: November 6, 2019

Abstract

Accounting firms list consistently among top M&A financial advisors in the Thomson Reuters, the Mergermarket Worldwide, and European league tables by deal count, and increasingly feature in rankings by deal value. We propose that bidders choose accounting firms to advise on transactions where the likelihood of overpaying for the target is high. For these transactions, accounting firms can lever on the industry expertise acquired from targets’ industries audits, which aids fairer target valuation. Consistently, we find that in terms of acquirer announcement returns and offer premia, transactions with hard-to-value targets are associated with higher M&A performance if the transactions are advised by accounting firms that are audit-specialists in the target’s industry. This effect is robust to endogeneity and various measures of valuation difficulty. Our findings highlight an important spillover effect from audit to non-audit functions and provide a new perspective for executives to evaluate their future M&A advisory choices.

Keywords: accounting firms, non-audit services, knowledge spillover, industry expertise, financial advisors, mergers and acquisitions

JEL Classification: G34, M41, M49

Suggested Citation

Bilinski, Pawel and Yim, Andrew, Accounting Firms in the M&A Advisory Market (November 6, 2019). Available at SSRN: https://ssrn.com/abstract=2695819 or http://dx.doi.org/10.2139/ssrn.2695819

Pawel Bilinski (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Andrew Yim

Cass Business School, City, University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

HOME PAGE: http://www.cass.city.ac.uk/faculties-and-research/experts/andrew-yim

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
2,283
PlumX Metrics