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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Advisor's Choice and M&As Performance |
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| Institution | University of Zurich |
| Faculty | Faculty of Economics, Business Administration and Information Technology |
| Number of Pages | 49 |
| Date | 2015 |
| Abstract Text | EMPIRICAL QUESTION M&A activity has been rallying in the last years, reaching levels never seen since the financial crisis that hit the world in 2007. From the lowest annual value recorded in 2009, $1,711.5bn, the total transaction volume grew at 13.5% CAGR, reaching $3,230bn in 2014. Goldman Sachs alone advised 378 deals in 2014, for a total deal value of $939,899m. The European M&A market has followed an analogous path, with the transaction value increasing at 14.1% CAGR (from $467bn in 2009 to $901bn in 2014) and with Goldman Sachs still playing the lead role (MergerMarket, 2014). Subsequently, fees demanded and earned by investment banks for the services rendered have increased as well, amounting to $90 billion in 2014 (+ 7% compared to 2013). The lion’s share of this amount goes to top-tier investment banks, leaded by the American financial institution JP Morgan, which earned $6.3 billion in fees in 2014. In Europe, the surge in fees has been even of a larger magnitude: +15% (Thomson Reuters, 2014). Figure I summarises these facts showing the evolution of total deal value (in $ billion, left scale) and investment banking fees (in $ million, right scale). As a consequence, the importance of financial advisors has been raising, due also to a generalized lack of confidence and trust. Companies and shareholders are willing to hire the best players in the market, hoping they will extract the best out of the deals they are involved in. Moreover, the right choice of financial intermediary has important implications on mergers and acquisitions performance. It is thus important to analyse the repercussions of this major decision in order to appropriately assess whether the high fees charged for the services offered by top-tier investment banks are justified and whether a so-called quality premium exists in M&A advisory. The aim of this master thesis is to deeply investigate the ramifications of this important decision and to compare the results with those found in previous empirical works, in order to evaluate in which situation the type of advisor has a major impact and whether hiring top-tier institutions creates wealth for shareholders or not. In comparison to previous academic researches, this paper will focus on European markets, more precisely on markets of the DACH region. |
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