Does loyalty pay off? The effect of the advisor-acquiror relationship on acquisition performance
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2024-06-25
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en
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Acquisitions are complex and uncertain events. Therefore, majority of deals are conducted with the help of external advisors hired by the acquiror. Around 20-30% of these acquisitions include advisors whom the acquiror has worked with in the past and are now rehired to continue future collaboration. The literature on these so-called advisor relationships is rather divided and does not clearly indicate their impact. This study set out to answer the question whether advisor relationships add value to acquisitions using Social Exchange Theory (SET). This is then further investigated by considering the moderating effect of recent collaboration (measured in whether and how often the acquiror and advisor worked together in the past five years). This moderating effect is underlined by SET and literature on advisors as something that could influence advisor relationships. Hypotheses are tested using an event study measuring cumulative abnormal returns to the acquiror to proxy acquisition performance. The sample consists of 5,955 large acquisitions by acquirors from leading industrial countries (G10). Opposite of expectations, results show that advisor relationships have either no or a value-destroying impact on acquiror returns. Moreover, the moderating effect reveals that recent collaborations in an advisor relationship don’t affect acquisition performance. Finally, results imply that having multiple advisors does not have any value-adding impact on performance compared to having just one advisor. These findings allow several academic and practical contributions to the discussion of advisor relationships, the impact of advisors in general and acquisition performance.
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Faculteit der Managementwetenschappen