The information role of advisors in mergers and acquisitions: Evidence from acquirers hiring targets’ ex-advisors
Tam, Lewis H.K.
Date of Issue2016
College of Business (Nanyang Business School)
We examine the information role of financial advisors by focusing on mergers and acquisitions in which acquiring firms hire target firms’ ex-advisors. We document that by employing targets’ ex-advisors, acquirers pay lower takeover premiums and secure a larger proportion of merger synergies. The corresponding targets exhibit lower announcement returns and are less likely to be propositioned by competing bidders. These results indicate that acquirers take advantage of value-relevant information about targets through targets’ ex-advisors, and achieve bargaining advantages in deal negotiations. In contrast, we document no discernible value effects when targets hire acquirers’ ex-advisors, suggesting that the information role of acquirers’ ex-advisors hired by targets is weaker than that of targets’ ex-advisors hired by acquirers.
Mergers and acquisitions
Journal of Banking & Finance
© 2016 Elsevier. This is the author created version of a work that has been peer reviewed and accepted for publication by Journal of Banking & Finance, Elsevier. It incorporates referee’s comments but changes resulting from the publishing process, such as copyediting, structural formatting, may not be reflected in this document. The published version is available at: http://dx.doi.org/10.1016/j.jbankfin.2016.05.006.