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Expert Advice: Industry Expertise of M&A Advisors and Acquirer Shareholder Returns
Published online by Cambridge University Press: 26 August 2021
Abstract
We find that acquirers create higher shareholder returns when advised by investment banks with more experience in the target industry. This finding is stronger when acquirers face more difficulties understanding and evaluating the targets. Further analyses show that these banks help acquirers avoid overpaying for targets and thus capture more of the deal synergy rather than making deals generating higher synergy. Our results are robust to controlling for an exhaustive set of determinants of acquirer returns and an identification strategy that exploits exogenous shocks to the supply of investment banks with target-industry experience.
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- Research Article
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- © The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington
Footnotes
We thank Vikas Agarwal, Allen Berger, Sinan Gokkaya, Omesh Kini, Paul Laux, Paul Malatesta (the editor), Pedro Matos, Harold Mulherin, Nickolaos Travlos (the referee), and seminar participants at the Cheung Kong Graduate School of Business, Chinese University of Hong Kong, Clemson University, Georgia State University, the University of Delaware, the University of Georgia, and the University of South Carolina for very helpful comments. Zhang acknowledges financial support from the National Natural Science Foundation of China (No. 71902115).
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