Study: Achieving higher valuations with M&A Advisers
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?