Analysts’ Connections and M&A Outcomes

Felipe Cortes () and Francisco Marcet ()
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Felipe Cortes: D’Amore-McKim School of Business, Northeastern University, Boston, Massachusetts 02115
Francisco Marcet: School of Economics and Business, University of Chile, Santiago 8330015, Chile

Management Science, 2023, vol. 69, issue 7, 4108-4133

Abstract: This paper studies the role of shared analysts, who cover the target and the acquirer, in mergers and acquisitions outcomes. We find that deals where both firms are connected through shared analysts are less likely to be completed than deals without shared analysts. If completed, however, deals with shared analysts exhibit higher expected synergy gains, acquirer announcement returns, and acquirer post-completion performance. Shared analysts are also more likely to issue estimates about the acquirer in the proximity of the impending deal and their estimates are associated with a decrease in the uncertainty about acquirer’s cash flows. Our results highlight how the position of analysts in a deal results in an informational edge that enhances the screening of deals and mitigation of the acquirer’s informational disadvantage. Shared analysts who enhance the acquirer’s ability to screen out deals also exhibit superior career outcomes post-completion. We find similar results in the pre- and post-Regulation Fair Disclosure period, using brokerage house closures as a quasi-natural experiment and after controlling for analysts’ affiliations.

Keywords: shared analysts; mergers and acquisitions; selection of deals; analyst’s connections (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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