Presenter: Keegan Cox
Authors: Keegan Cox
Faculty Advisor: Nathan McNamee
Institution: Southern Utah University
This paper examines factors influencing the choice of using financial advisors in M&As, the speed of transaction completion relative to the fees that bidders and targets pay their advisors, and the performance of boutique advisors. Our sample contains 31,484 merger deals from the Thompson SDC Financial Database, ranging from January 1990 to December 2019. We find that bidders are more likely to retain their investment bank advisor when the average of their returns on prior deals are negative. Unsurprisingly, we find that target advisors complete deals more quickly when the target firm pays a greater fee. We also find that the target firm’s use of a boutique investment bank advisor severely destroys target shareholder value as measured by cumulative abnormal returns. Target shareholder value is additionally diminished if the bidder has hired a top-tier bank based on performance in previous deals.