Every year, companies pursuing M&A deals spend nearly $40 billion on advisors. These investment bankers, lawyers, and other professionals are hired to provide domain-specific expertise to the acquirer or acquiree, an independent “second opinion” for the board, or other services to help close a deal. But do they actually add value to the mergers and acquisitions they’re meant to support?
Research: How Many M&A Advisors Do You Really Need?
An analysis of 10,000 acquisitions finds the market performance of firms with two or more advisors tends to be worse than those with just one.
December 15, 2022
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Summary.
When it comes to M&A deals, outside advisors are often a necessity. However, the authors’ recent research shows that they can come at a cost: An analysis of market reactions to 10,000 U.S.-based acquisitions found that firms with a single advisor outperformed those with none — but firms which retained two or more advisors performed worse than those with just one. Through a series of interviews with industry experts, the authors identified four factors driving this effect, as well as six strategies to help executives maximize the value-add of working with multiple advisors. Ultimately, the authors argue that while their default incentives and routines sometimes make collaboration challenging, working with multiple advisors can still add substantial value when they’re managed with an eye toward teamwork and long-term results.