Done Deal! Advisor impact on Pricing, Premia, Returns, and Deal Completion in M&A

CentER Discussion Paper Series No. 2020-032

44 Pages Posted: 3 Feb 2021

See all articles by C. Fuat. J. Ecer

C. Fuat. J. Ecer

Heidelberg University

Stefan T. Trautmann

Heidelberg University - Alfred Weber Institute for Economics

Date Written: December 3, 2020

Abstract

We study the role of financial advisors in M&A for different advisor engagement constellations. We observe positive effects of both target and acquirer advisors on deal completion and prices. The unexpected positive price effect of acquirer advisors is further supported by evidence for higher premia and lower announcement bidder returns. We establish causality of pricing effects using matching and instrumental-variable approaches, making use of the impact of Lehman’s collapse on former Lehman clients. We explain our findings in terms of governance: advisors’ and executives’ incentives form a potential source of value destruction.

Keywords: Mergers & Acquisitions, Financial Advisors, Transactions, Governance

JEL Classification: G24, G34, G41

Suggested Citation

Ecer, C. Fuat. J. and Trautmann, Stefan T., Done Deal! Advisor impact on Pricing, Premia, Returns, and Deal Completion in M&A (December 3, 2020). CentER Discussion Paper Series No. 2020-032, Available at SSRN: https://ssrn.com/abstract=3742062 or http://dx.doi.org/10.2139/ssrn.3742062

C. Fuat. J. Ecer

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

Stefan T. Trautmann (Contact Author)

Heidelberg University - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany

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