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How Much Does Your Banker’s Target-Specific Experience Matter? Evidence from Target IPO Underwriters that Advise Acquirers

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  • Richard Herron

    (Northeastern University)

Abstract

In a sample of 1,507 US all-public acquisitions from 1985–2014, 5% of acquirers use the same advisor that underwrote the target’s initial public offering. Acquirers who use these informed advisors have acquisition announcement three-day cumulative abnormal returns (CARs) that are 2.048 percentage points higher, all else equal. Same-advisor acquisition announcements have higher combined CARs but not lower target CARs, suggesting higher synergies instead of lower deal premia. Same-advisor acquisition announcement outperformance decays as the target ages and grows. These findings show the value and timeliness of investment bank information production, retention, and transfer.

Suggested Citation

  • Richard Herron, 2022. "How Much Does Your Banker’s Target-Specific Experience Matter? Evidence from Target IPO Underwriters that Advise Acquirers," Journal of Financial Services Research, Springer;Western Finance Association, vol. 61(2), pages 217-258, April.
    • Handle: RePEc:kap:jfsres:v:61:y:2022:i:2:d:10.1007_s10693-020-00346-5
    DOI: 10.1007/s10693-020-00346-5
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    Cited by:

    1. Wenjun Wang, 2024. "You scratch my back and i scratch yours: evidence from relationship-based bidding in IPO auctions," Review of Quantitative Finance and Accounting, Springer, vol. 62(4), pages 1593-1613, May.

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    More about this item

    Keywords

    Mergers; Acquisitions; Investment banking;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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