Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts

34 Pages Posted: 14 Jun 2005 Last revised: 21 Dec 2022

See all articles by Charles W. Calomiris

Charles W. Calomiris

Columbia University - Columbia Business School; National Bureau of Economic Research (NBER)

Donna M. Hitscherich

Columbia University - Columbia Business School, Finance

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Date Written: May 2005

Abstract

We analyze data on fees paid to investment bankers and acquisition premia paid for targets in cash tender offers. 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.

Suggested Citation

Calomiris, Charles W. and Hitscherich, Donna M., Banker Fees and Acquisition Premia for Targets in Cash Tender Offers: Challenges to the Popular Wisdom on Banker Conflicts (May 2005). NBER Working Paper No. w11333, Available at SSRN: https://ssrn.com/abstract=723302

Charles W. Calomiris (Contact Author)

Columbia University - Columbia Business School ( email )

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Donna M. Hitscherich

Columbia University - Columbia Business School, Finance ( email )

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New York, NY 10027
United States

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