Expert Advice: Industry Expertise of M&A Advisors and Acquirer Shareholder Returns
Journal of Financial and Quantitative Analysis forthcoming
43 Pages Posted: 25 Aug 2020 Last revised: 11 Jan 2021
Date Written: August 5, 2020
We find that acquirers create higher shareholder returns when advised by investment banks with more experience in the target industry. This finding is stronger when acquirers face more difficulties understanding and evaluating the targets. Further analyses show that these banks help acquirers avoid overpaying for targets and thus capture more of deal synergy rather than making deals generating higher synergy. Our results are robust to controlling for an exhaustive set of determinants of acquirer returns and an identification strategy that exploits exogenous shocks to the supply of investment banks with target industry experience.
Keywords: Industry Expertise, M&A Advisor, Acquirer Returns, Advisory Fee, Advisor Choice
JEL Classification: G24, G34
Suggested Citation: Suggested Citation