This thesis investigates the role of financial advisors and their impact on their clients' short-term M&A deal performance. The examination of the extant literature on M&A advisors reveals a lack of focus on the target side of the equation. Therefore, the first topic is dedicated to the examination of the effects of target financial advisors' involvement and quality on their clients' short-term M&A deal outcomes. The findings reveal that targets that opt to hire an advisor are able to achieve better short-term deal performance, and that highly reputable target advisors are associated with higher premiums in all-cash deals.
To add more clarity on the mechanisms through which target advisors contribute to the performance of M&A deals, I leverage a hand-collected dataset, from public targets' SEC filings, that covers the actual activities conducted by target advisors. The results of the analyses conducted show that target advisors add value through the provision of services relating to the evaluation of deals from a financial perspective, however, assigning them to the search/matching activities is associated with a negative effect on the premium achieved.
Despite the abundant literature on the role of acquirers' financial advisors in M&A deals, findings on the impact of their involvement in such deals are rather inconclusive, and the bulk of research in this area is quite dated. Using the different ranking schemes developed, I re-examine this topic using a most recent dataset (2001 to 2017). I find that acquirers' financial advisors with stronger past performance are able to secure better short-term deal outcomes to their clients, and in line with Golubov et al. (2012), highly reputable acquirers' advisors deliver higher returns to their clients in public deals. The presence of an advisor (on the target or on the acquirer side) allows completing deals in a shorter period of time.
This thesis covers, as well, the determinants of advisor hiring-related decisions regarding the reputation of the advisor selected. The findings reveal that, on the target side, there is a higher propensity to hire a highly-ranked financial advisor when the firm is being served by a Big-4 accounting firm, and in the presence of a larger institutional ownership base. On the acquirer side, firms are found to be more likely to hire a highly-ranked financial advisor if they face a higher litigation risk, if they are served by a Big-4 accounting company, and if they involve a higher institutional ownership base.
The findings of this research project hold important implications both for businesses involved, through guiding their choice of advisor to assist them with their M&A deals, and for the academic research by offering a comprehensive analysis that incorporates a range of existing and newly developed proxies of quality, thus reconciling the inconclusive findings reached in the extant literature.
| Identifer | oai:union.ndltd.org:uottawa.ca/oai:ruor.uottawa.ca:10393/44748 |
| Date | 27 March 2023 |
| Creators | El Haj Hassan, Boushra |
| Contributors | Dutta, Shantanu |
| Publisher | Université d'Ottawa / University of Ottawa |
| Source Sets | Université d’Ottawa |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf |
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