The role of investment banks in mergers and acquisitions: deal completion, deal certification or value creation?

The role of financial advisors in mergers and acquisitions (M&A) has received only little attention by researchers over the last two decades. No clear conclusion was drawn on the question as to whether financial advisors add value to the transactions that they assist. The deal-completion hypothesis posits that investment banks have strong incentives to complete a transaction, irrespective of whether the deal creates value. Incontrast, the superior-deal hypothesis suggests that financial advisors add value during the M&A process, by selecting better deals and by structuring deals in a way that maximizes value for their clients. This research project focuses on the role of financial advisors in M&As in a European setting, which appears to be different from the traditional Anglo-Saxon setting. To that end, we examine three research questions. First,what are the reasons for acquiring companies to hire an investment bankto advise them in M&As? Moreover, under what circumstances are companies more likely to hire a more reputable investment bank? Second, we examine whether hiring a (top-tier) investment bank results in more positive M&A value effects. Third, we examine whether acquirers who use the services of an investment bank structure their takeovers in a different way than acquirers who implement their acquisitions in-house.

Keywords:Event Study, Corporate Finance, Mergers and Acquisitions, Investment banks

Disciplines:Applied economics

Project type:PhD project