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A combined firm's decision to hire the target's financial advisor after acquisition: Does “service excellence” pay off?

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  • Bhattacharya, Debarati
  • Hsu, Shih-Che
  • Li, Wei-Hsien
  • Liu, Chun-Ting

Abstract

This paper explores three reasons why after the completion of an M&A deal, the combined firm chooses to hire the target's financial advisor, with whom the acquiring firm has no prior relationship. We find that the likelihood of hiring the target's advisor improves when it provides superior service to the target, if it is a reputable investment bank or when the target's management is more likely to be retained by the combined firm. Our evidence suggests that the “service excellence” demonstrated by investment banks is valuable not only for enhancing their ongoing business relationships, but also for securing future business.

Suggested Citation

  • Bhattacharya, Debarati & Hsu, Shih-Che & Li, Wei-Hsien & Liu, Chun-Ting, 2019. "A combined firm's decision to hire the target's financial advisor after acquisition: Does “service excellence” pay off?," Finance Research Letters, Elsevier, vol. 29(C), pages 297-302.
    • Handle: RePEc:eee:finlet:v:29:y:2019:i:c:p:297-302
    DOI: 10.1016/j.frl.2018.08.004
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    More about this item

    Keywords

    M&As; Financial advisors;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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