Central Hub M&A Advisors. (4th January 2021)

• Record Type: Journal Article
• Authors: Yawson, Alfred; Zhang, Huizhong
• Is Part Of: Review of finance. Volume 25:Number 6(2021)
• Page Start: 1817
• Page End: 1857
• Publication Date: 2021-01-04
• Subjects: G14 -- G24 -- G34; Mergers and acquisitions -- M&A advisors -- Network centrality -- Information production -- Acquirer abnormal returns -- Takeover premium -- Advisory fee; Finance -- Europe -- Periodicals; Financiën; Finance; Periodicals; 332.09405
• DOI: 10.1093/rof/rfaa043
• Languages: English
• ISSNs: 1572-3097

Abstract

Abstract: We examine how an M&A advisor's position in the network of investment banks affects its ability to create value for acquirers in takeover transactions. We show that acquirers enlisting the services of more centrally positioned M&A advisors enjoy higher announcement abnormal returns and pay lower takeover premiums. Consistent with the idea that central network positions convey an information advantage, we find that the effects are stronger for acquirers facing greater target information asymmetry and for M&A advisors depending more on networks for target-specific information. The information advantage primarily comes from network contacts that had previously assisted the targets in equity issuance. Centrally positioned advisors charge premium fees; network banks appear to enjoy a significant advantage in the competition for future co-advisory appointments.