WHY BIDDING FIRMS DO NOT HIRE FINANCIAL ADVISORS IN MERGERS AND ACQUISITIONS

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Wallace N. Davidson III, Shenghui Tong, Richard Proctor

DOI:10.22495/cocv5i3c2p7

Abstract

In this paper, we examine why some bidders decide not to hire investment bank advisors in M&A transactions. We build a sample of 181 M&A transactions in which the acquiring firms do not hire investment bank advisors, and compare them with a control sample of 181 M&A transactions in which the acquiring firms hire investment bank advisors. We find that the transaction costs are the primary reason that investment banks are hired as advisors for bidders in M&A transactions. In addition, the information asymmetry and contracting costs are the other two reasons that bidders hire investment banks in M&A transactions.

Keywords: Mergers, Acquisitions, Investment Banks

How to cite this paper: Davidson III, W. N., Tong, S., & Proctor, R. (2008). Why bidding firms do not hire financial advisors in mergers and acquisitions. Corporate Ownership & Control, 5(3-2), 316-323. http://doi.org/10.22495/cocv5i3c2p7