Done Deal! Advisor impact on Pricing, Premia, Returns, and Deal Completion in M&A

We study the role of financial advisors in M&A for different advisor engagement constellations. We observe positive effects of both target and acquirer advisors on deal completion and prices. The unexpected positive price effect of acquirer advisors is further supported by evidence for higher premia and lower announcement bidder returns. We establish causality of pricing effects using matching and instrumental-variable approaches, making use of the impact of Lehman’s collapse on former Lehman clients. We explain our findings in terms of governance: advisors’ and executives’ incentives form a potential source of value destruction.