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Competition in the Market for Takeover Advisers

Author

Listed:
  • Raymond da Silva Rosa

    (UWA Business School, The University of Western Australia, 35 Stirling Highway, Crawley, WA 6009.)

  • Philip Lee

    (School of Business, University of Sydney, Camperdown, NSW, 2006.)

  • Michael Skott

    (Boston Consulting Group, Level 28, Chifley Tower, 2 Chifley Square Sydney NSW 2000.)

  • Terry Walter

    (School of Banking and Finance, The University of New South Wales, Sydney, 2052 and Capital Markets Cooperative Research Centre Limited, Level 2, 9 Castlereagh Street, Sydney NSW 2000.)

Abstract

We investigate factors that motivate bidders to engage advisers, we model adviser selection and we test whether value-adding advisers gain market share. Our sample includes 801 attempted takeovers over 1989–1998 in Australia. Our results indicate advisers are likely to be engaged if the takeover deal is large, hostile, and includes non-cash compensation. We find deal completion is not as closely correlated with adviser rankings as does Rau (2000) but we confirm his finding that adviser ranked high on market value of deals advised do not have a comparative advantage in adding value to firms. However, we document some (limited) evidence that value-adding advisers achieve an increase in subsequent deal flow. Our results are consistent with specialization among takeover advisers.

Suggested Citation

  • Raymond da Silva Rosa & Philip Lee & Michael Skott & Terry Walter, 2004. "Competition in the Market for Takeover Advisers," Australian Journal of Management, Australian School of Business, vol. 29(1_suppl), pages 61-92, June.
    • Handle: RePEc:sae:ausman:v:29:y:2004:i:1_suppl:p:61-92
    DOI: 10.1177/031289620402901S03
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    References listed on IDEAS

    as
    1. Raghavendra Rau, P., 2000. "Investment bank market share, contingent fee payments, and the performance of acquiring firms," Journal of Financial Economics, Elsevier, vol. 56(2), pages 293-324, May.
    2. Chemmanur, Thomas J & Fulghieri, Paolo, 1994. "Investment Bank Reputation, Information Production, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 49(1), pages 57-79, March.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Chahine, Salim & Ismail, Ahmad, 2009. "Premium, merger fees and the choice of investment banks: A simultaneous analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 159-177, May.
    2. Anna Bedford & Martin Bugeja & Matthew Grosse, 2021. "The choice of financial advisory and independent expert services in takeovers: evidence in a setting where the services are independent," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(2), pages 3649-3683, June.
    3. Ahmad Ismail, 2010. "Are good financial advisors really good? The performance of investment banks in the M&A market," Review of Quantitative Finance and Accounting, Springer, vol. 35(4), pages 411-429, November.
    4. Killian J. McCarthy & Florian Noseleit, 2022. "Too many cooks spoil the broth: on the impact of external advisors on mergers and acquisitions," Review of Managerial Science, Springer, vol. 16(6), pages 1817-1852, August.
    5. Feng, Yun & Liu, Chelsea & Yawson, Alfred, 2023. "Economic shocks, M&A advisors, and industry takeover activity," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    6. Guo, Jie (Michael) & Li, Yichen & Wang, Changyun & Xing, Xiaofei, 2020. "The role of investment bankers in M&As: New evidence on Acquirers’ financial conditions," Journal of Banking & Finance, Elsevier, vol. 119(C).
    7. Walter, Terry S. & Yawson, Alfred & Yeung, Charles P.W., 2008. "The role of investment banks in M&A transactions: Fees and services," Pacific-Basin Finance Journal, Elsevier, vol. 16(4), pages 341-369, September.

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