Lawyer Expertise and Contract Design Â?? Evidence from M&A Negotiations

70 Pages Posted: 29 Jun 2020 Last revised: 27 Jul 2020

See all articles by Christel Karsten

Christel Karsten

Strategy&

Ulrike Malmendier

University of California, Berkeley - Department of Economics; University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Date Written: June 2020

Abstract

Using unique data on company acquisition contracts, we document significant variation in contracts depending on the expertise of the negotiating parties. Lawyers with higher expertise relative to their counterparties negotiate better risk allocation for their clients and more favorable target prices, after controlling for the deal environment, the quality of financial advisors, and other features of the contract design. The benefits of high expertise appear to outweigh its costs, largely because high-expertise lawyers economize on transaction costs by shortening negotiation times. Our findings help explain the importance of league tables and variation in legal fees in the M&A industry.

JEL Classification: D86, G34, K12

Suggested Citation

Karsten, Christel and Malmendier, Ulrike and Sautner, Zacharias, Lawyer Expertise and Contract Design Â?? Evidence from M&A Negotiations (June 2020). CEPR Discussion Paper No. DP14936, Available at SSRN: https://ssrn.com/abstract=3638040

Ulrike Malmendier

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
(510) 642-8724 (Phone)
(510) 642-6615 (Fax)

HOME PAGE: http://www.econ.berkeley.edu/~ulrike/

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

HOME PAGE: http://www.iza.org/en/webcontent/personnel/photos/index_html?key=918

Zacharias Sautner

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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