Calidad de Agua y Sedimentos de la Cuenca del Rio Madre de Dios

Table 3.8 presents the results of regression analysis of acquirer total advisory fees. Specifications 1 and 2 represent the regressions of acquirer total advisory fees on the

Top-Tier dummy, and Specifications 3 and 4 represent the regressions of acquirer total advisory fees on the variable No. of TopTier. In specifications 1 and 3, deal characteristics are controlled for. In specifications 2 and 4, both deal characteristics and acquirer firm characteristics are controlled for.

[Insert Table 3.8 here]

In specifications 1 and 2, the coefficients on the TopTier dummy are significantly positive, suggesting acquirers that retain top-tier advisors will pay higher total advisory fees. In specifications 3 and 4, the coefficients on the variable No. of TopTier is significantly positive, indicating that the more top-tier advisors are retained by acquirers, the more total advisory fees are paid by acquirers. It is reasonable that prestigious investment banks charge higher advisory fees. In addition, the variable No. of Advisors is significantly positive in all of the specifications, suggesting that an increase in the number of advisors retained leads to greater total advisory fees to pay.

Furthermore, both the variable Ln(TV) and the variable Relative Size are significantly positive in all of the specifications, indicating that acquirers pay higher advisory fees when deals are large. Additionally, the Hostile dummy is significantly positive in all of the specifications, which suggests that acquirers pay higher advisory fees for hostile deals than friendly deals. Indeed, large deals are more complex than small deals, and hostile deals are more complex than friendly deals. It is reasonable that advisors charge higher advisory fees for deals with greater complexity. The variable Past Experience is

significantly negative in all of the specifications, indicating that more experienced acquirers pay lower advisory fees.

3.5.2.3. Time to Completion

Table 3.9 presents the results of regression analysis of time-to-completion. Specifications 1 and 2 represent the regression of time-to-completion on the Top-Tier dummy. Specifications 3 and 4 represent the regression of time-to-completion on the variable No. of TopTier. Specifications 5 and 6 represent the regression of time-to-completion on the

InHouse dummy. In specifications 1, 3, and 5, deal characteristics are controlled for. In specifications 2, 4, and 6, both deal characteristics and acquirer firm characteristics are controlled for.

[Insert Table 3.9 here]

In specifications 1 and 2, the coefficients on the TopTier dummy is insignificant, indicating that top-tier advisors do not spend less time than non-top-tier advisors helping their clients complete deals. Similarly, in specifications 3 and 4, the coefficient on the variable No. of TopTier is also insignificant, indicating that an increase in top-tier advisors retained does not significantly shorten or extend time-to-completion. If top-tier advisors have superior skills, they will be able to complete deals in a shorter time than non-top-tier advisors. However, the insignificant coefficients on the TopTier dummy and the variable

No. of TopTier suggest that top-tier advisors work diligently.

In specification 5 and 6, the coefficient on InHouse dummy is significantly positive, indicating that in-house acquirers take longer than acquirers advised by investment banks to complete deals. This chapter also calculated the marginal effects of the InHouse dummy.

Specifically, in-house acquirers take 21.50 more days to complete deals compared to acquirers advised by banks, after controlling for deal and firm characteristics. This result is not difficult to explain, since financial advisors are more professional at making M&A deals compared to acquirers with in-house expertise.

Additionally, the variable No. of Advisors is significantly positively related to time-to-completion in all of the specifications, suggesting that the more the advisors retained, the longer the time used to complete the deals. The result is consistent with Hunter and Jagtiani (2003). They explain this phenomenon by saying that retaining more advisors implies that a deal is more complex.

Furthermore, the variable Relative Size is significantly positive in all of the specifications, indicating that acquirers take more time to complete large deals than small deals. Both the

Cash dummy and Stock dummy are significantly negative, indicating that acquirers take less time on all-cash deals and all-stock deals than mixed paid deals. The Hostile dummy is significantly positive, indicating that acquirers use more time to complete hostile acquisition than friendly acquisition. The Competing Bid dummy is significantly positive, indicating that acquirers spend more time on the deals with bid competition. The variable

Tender Offer is significantly negative, indicating that acquirers take less time conducting a tender offer. In fact, large targets, mixed payments, hostile attitude, and multiple bidder contests render acquisitions more complex and time-consuming.

Interestingly, the variable Pre-deal Ownership is significantly positive in all of the specifications, which suggests that acquirers with higher pre-deal ownership use more time to complete deals. The variable Past Experience is insignificant in all of the specifications. Initially, this chapter predicted that more experienced acquirers are more

skilful and therefore could take less time to complete deals. However, more experienced acquirers do not significantly shorten the time-to-completion. The result suggests that more experienced acquirers are careful about due diligence and negotiations.

3.5.3. Discussion

Top-tier advisors can help acquirers pay a lower bid premium. Acquirers advised by multiple top-tier advisors even pay much lower bid premium than acquirers advised by a single top-tier advisor. These results suggest that top-tier advisors can help their clients to obtain a bargaining advantage in negotiation process. However, deals advised by top-tier investment banks require significantly higher total advisory fees. Hence, there is concern that overpayment could offset cost reduction in bid premium. In particular, the concern of overpayment will be more serious when multiple top-tier advisors are retained. Therefore, this chapter examines whether cost reduction in bid premiums can cover premium advisory fees.

3.5.3.1. Deals Advised by Top-Tier Advisors versus Deals Advised by