Merger Waves and the Importance of Financial Advisors Reputation for Acquirers

• Activity Number: 199 - Computation Meets Testing for Financial Data
• Type: Contributed
• Date/Time: Monday, August 8, 2022 : 2:00 PM to 3:50 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Jose Faias*
• Companies: Católica Lisbon School of Business and Economics
• Keywords: Mergers and acquisitions; top-tier advisors; merger waves; endegoneity

Abstract

There is mixed evidence on the value of top-tier advisors for acquirers. Based on 7,192 U.S merger and acquisitions deals between 1980 and 2015, we reconcile previous contradictory findings by showing that top-tier advisors are associated with higher acquirer returns for public and private targets but only in periods of merger waves. Nevertheless, top-tier advisors demand a premium fee for their services both in and out of merger waves. They work as a certification mechanism when there is investors’ limited attention and greater uncertainty in the market.