The role of investment banks in M&A transactions: Fees and services |
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Institution: | 1. Instituto de Empresa, Maria de Molina, 11, 28006 Madrid, Spain;2. IESE Business School, Camino del Cerro del Aguila, 3, 28023 Madrid, Spain;1. The Wharton School of the University of Pennsylvania, Philadelphia, PA 19104, USA;2. Drexel University, Philadelphia, PA 19104, USA;3. Cornerstone Research, San Francisco, CA 94111, USA;1. University of Nicosia, 46 Makedonitissas Avenue, CY-2417, P.O. Box 24005, CY-1700 Nicosia, Cyprus;2. Ural Federal University, Yekaterinburg, Russia |
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Abstract: | We examine the pricing and performance of advisers in M&A transactions. We determine adviser quality on the basis of a contemporaneous market share measure and show that high quality advisers receive higher M&A advisory fees. High quality advisers also complete deals faster, but their superiority is not reflected in increasing the likelihood of deal completion or delivering greater abnormal equity returns to their clients. It is well known that stock bids are received more negatively than cash bids, so we further partition the sample of acquirers by consideration type and examine the abnormal returns of each partition. We find that high quality investment banks are able to differentiate themselves by delivering greater abnormal returns to their acquirer clients in deals involving stock. |
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