DOES IT ALWAYS PAY TO PAY YOUR INVESTMENT BANKER? DISTRACTED ADVISORS AND THE PERFORMANCE OF SMALL M&A DEALS BEFORE AND AFTER THE FINANCIAL CRISIS

This paper provides new evidence on the role of financial advisors in M&As. We examine how the value added by financial advisors to small and medium M&A transactions changed after the financial crisis. We show that before the crisis financial advisors prioritised large deals at the expenses of small M&A transactions. The involvement in a very large and complex deal hindered the ability of financial advisors to create value for the smaller transactions they were also assisting. However, after the crisis, this effect disappears especially in deals advised by large investment banks which merged with large financial conglomerates in the wake of the financial crisis. Our findings suggest that the financial crisis, and the resulting reorganisation of the banking sector, substantially changed the business models of financial advisors in M&As.