Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts
33 Pages Posted: 27 Apr 2005
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Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts
Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts
Date Written: April 20, 2005
Abstract
Our results are broadly consistent with the predictions of a benign view of the role of investment banks in advising acquisition targets. Fees to investment banks are correlated with attributes of transactions and target firms in ways that make sense if banks are being paid for processing information. The more contingent (and, therefore, risky) the fees, the higher they tend to be, all else held constant. Variation in acquisition premia also can be explained by fundamental deal attributes. Contrary to the jaundiced view of fairness opinions, greater fixity of fees is not associated with higher acquisition premia, and there is no evidence that investment banks are suborned by acquirors with whom they have had a prior banking relationship.
Keywords: Fairness opinions, conflicts of interest, investment bank, fees, merger, acquisition premia
JEL Classification: G2, G24, G28, G3, G34, G38, G00
Suggested Citation: Suggested Citation
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