The Added Value of Advisory Services in SME Mergers and Acquisitions.

14 Pages Posted: 4 Jun 2014

Date Written: June 4, 2014

Abstract

The objective of this study is to shed light on the added value of the services of five disciplines in M&A advisory in the SME domain: accountants, bankers, business brokers, fiscalists and lawyers. Theory is inconclusive in the added value of advisory services and research on the subject is hardly available. RBV predicts direct benefits in using advisory services in M&A, leading to less obstacles in and directly after M&A or lagged effects on more renewal of the firm. The theory of structural holes, agency theory and management entrenchment theory on the other hand predict neutral or negative effect of advisory services in M&A.

The dataset includes 899 mergers and acquisitions (1) completed before 2003; (2) with an acquirer having bought 100% of target shares or assets; (3) of German, Belgian or Dutch origin; (4) of non-listed firms; (5) where acquirer and target firm are not member of the same family. Using (M)ANOVA’s and controlling for the effects of more than one advisor involved, the outcomes show consistently that the M&A advisory services do not reduce obstacles like financing, misinformation and culture and staff problems during or immediately after M&A. Looking at lagged effects of advisory services in the period of two years after M&A strategic more renewal by innovation occurs if bankers, fiscalists and lawyers are involved. Involvement of accountants and business brokers on the other hand decrease renewal.

Overall the theory of structural hole, agency theory and “advisory entranchment” seem to prevail, during and immediatley after acquisition. There is no immediate benefit on using advisors in M&A. The lagged effect on firm renewal, more specifically on innovations support RBV, showing that advisory services increase firm innovation in the two years after acquisition. The database has some limitations. It could not be controlled for the qualifications and experiences of the advisors, the phases of M&A they were involved in and the possibility that firm acquirers didn’t listen to sound advice given.

Keywords: SME, small firm, ownership change, merger, acquisition, M&A, buyer, firm acquirer, resource based view, agency theory, management entranchement, financing, misinformation, culture, staff, accountant, business broker, banker, lawyer, fiscalist

Suggested Citation

van Teeffelen, Lex, The Added Value of Advisory Services in SME Mergers and Acquisitions. (June 4, 2014). Available at SSRN: https://ssrn.com/abstract=2446045 or http://dx.doi.org/10.2139/ssrn.2446045

Lex Van Teeffelen (Contact Author)

HU Business School Utrecht ( email )

Utrecht
Netherlands

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