On the role of investment banks in M&As in Europe: Deal completion, deal certification, or just value creation?

The role of financial advisors in mergers and acquisitions (M&As) has received only little attention by researchers over the last two decades. Also, this research has mainly focused on US and UK M&As. Moreover, no clear conclusion was drawn on the question as to whether financial advisors add value to the transactions that they assist. There are two main theories on the role of financial advisors. First, the ‘deal-completion hypothesis’ posits that investment banks have strong incentives to complete a transaction, irrespective of whether it creates value. Second, 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 bank to advise them in M&As? Moreover, under what circumstances are companies more likely to hire a more reputable investment bank? Second, we examine whether acquirers who hire investment bank structure their takeovers in a different way than acquirers who implement their acquisitions in-house. Finally, we examine whether hiring a (top-tier) investment bank results in more positive M&A value effects.