TY - JOUR
T1 - The banking relationship's role in the choice of the target’s advisor in mergers and acquisitions
AU - Forte, G
AU - Iannotta, Giuliano Orlando
AU - Navone, M.
PY - 2010
Y1 - 2010
N2 - We analyse the factors influencing the target company’s choice of bank advisor
in mergers and acquisitions (M&As). We first examine the choice of hiring an
advisor, which is nontrivial, since in one-third of transactions our sample target companies did not hire one. We also analyse the choice to hire as advisor a bank with a strong prior relationship with the company (i.e., the main bank). Using data on 473 European M&A transactions completed in the period 1994–2003, we find evidence that the decision to hire an advisor depends on three main factors: (i) the intensity of the previous banking relationship, (ii) the reputation
of the bidder company’s advisor, and (iii) the complexity of the deal. We also investigate the impact of the bank advisor on shareholder wealth. We find that the abnormal returns of target company shareholders increase with the intensity of the previous banking relationship, thus indicating a ‘certification role’ on the
part of investment banks.
AB - We analyse the factors influencing the target company’s choice of bank advisor
in mergers and acquisitions (M&As). We first examine the choice of hiring an
advisor, which is nontrivial, since in one-third of transactions our sample target companies did not hire one. We also analyse the choice to hire as advisor a bank with a strong prior relationship with the company (i.e., the main bank). Using data on 473 European M&A transactions completed in the period 1994–2003, we find evidence that the decision to hire an advisor depends on three main factors: (i) the intensity of the previous banking relationship, (ii) the reputation
of the bidder company’s advisor, and (iii) the complexity of the deal. We also investigate the impact of the bank advisor on shareholder wealth. We find that the abnormal returns of target company shareholders increase with the intensity of the previous banking relationship, thus indicating a ‘certification role’ on the
part of investment banks.
KW - relationship banking
KW - relationship banking
UR - http://hdl.handle.net/10807/43050
UR - http://dx.medra.org/10.111/j.1468-036x.2009.00481.x
U2 - 10.111/j.1468-036x.2009.00481.x
DO - 10.111/j.1468-036x.2009.00481.x
M3 - Article
VL - 16
SP - 686
EP - 701
JO - European Financial Management
JF - European Financial Management
SN - 1354-7798
ER -