Does Hiring M&A Advisers Matter for Private Sellers?

A new study shows that M&A Advisers create price premiums of 27% to 37% for sellers of private companies.

A recent article in the Harvard Law School Forum on Corporate Governance and Financial Regulation reviews a draft paper written by Finance professors at The Universities of Alabama, Mississippi and Louisiana Tech analyzing the question “Does hiring M&A advisers matter for private sellers?”.  The findings are summarized in the Harvard article and conclude that “On average, private sellers receive significantly higher valuations when they retain M&A advisers”.

Numerous studies had previously analyzed the benefits to public companies of using M&A advisers but this is the first paper to address the value of using M&A advisers in the sale of private companies.  The authors reviewed 4,468 acquisitions of private companies during the period 1980-2010.  Using multiple analytical methods they found that sellers of private companies received sale price premiums that, on average, were  27% to 37%  greater than transactions for private sellers who did not use an M&A adviser.

The authors propose multiple reasons for the premium sales prices when using M&A advisers.  These include the benefits M&A advisers bring in:

— Reducing information asymmetries,

— Specialized skills in valuation, finding potential acquirers, negotiations and closing process

— Increasing competition

The authors were able to show that hiring an M&A adviser is found to be a causal factor in generating price premiums of 27% to 37%.  That is, the increased sale price is actually caused by the M&A adviser and is not simply a correlation of unrelated events.

To read the full article, visit: Does Hiring M&A Advisers Matter for Private Sellers?

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