Thijmen

Introduction#

Main RQ: M&A Advisors $\Rightarrow$ M&A Performance

I think you motivate the topic well and introduce relevant empirical findings, but the main issue I have is the top-25 part.

  • What share of all M&A deals is advised by a top-25 firm? If they do all the advisory work or represent the larger share of all M&A deals, it makes sense to go for a smaller group of firms?

  • Furthermore, the top 25 is a variable criterion. At one point, an investment bank can be in the top-25 or not. Why do you opt for such a criterion, and not something less vulnarable to change?

You use the deal deal structure in the introduction without defining in. Can you explain (to me, but also to the reader) what it is?

  • Are there other reasons (other than deal structure) that can cause superior or inferior returns to M&A for M&As advised by the top-25? For example, might the stock market be fooled by the superior reputation of the top 25, mistakenly thinking it adds value while it doesn’t?

Literature#

I think your literature needs a little more structure. My proposal:

  1. Determinants of M&A Performance
  2. Focus specifically on advisors' roles
  3. Selection effects (better M&A pick prestigious banks) (Hypothesis 1)
  4. Real value-adding effects (Investment banks add value) (Hypothesis 2)

I don’t really get the justification behind hypothesis 3.

Methodology and Data#

  • You can distinguish between short-term performance (CARs)
  • And long-term performance (RoA/RoE for a couple of years after merger)
    • You can also find that data (presumably) by using tickers/isins/something else and going to WRDS/BvD
    • Probably something worth to discuss

Hypothesis 1: A significant performance difference exists between the 25 largest investment banks.

To test the first hypothesis, the fixed effect model of the return component is estimated.

What does this mean? I think you should just take the CARs (at day 1, 10, or anything else), and do linear regression with a dummy for advised by the top 25 + controls on the right-hand side

Hypothesis 2: After controlling for acquirer characteristics and deal size, performance differences between investment banks remain present.

  • You can also try to see if you can employ a matching estimator to attempt to solve the “selection into the treatment” problem. Intuition: for every M&A deal that is advised by a top-25 investment bank, you can find several obervations (M&A deals) that had a high probability of also being advised by a top-25 bank, but weren’t. You can use those as the counterfactual observations for the effect of a top-25 bank. Potentially, that eliminates selection on observables and non-observables.

Hypothesis 3: The position on the league table is a better predictor of investment bank M&A service revenue growth than past performance, which allows for performance persistence.