Legal Advisors: Popularity Versus Economic Performance in Acquisitions

C.N.V. Krishnan, Paul A. Laux
2004 Social Science Research Network  
Law ...rms provide extensive intermediation in corporate acquisitions, including negotiation, certi...cation, and drafting of contracts and agreements. Using a broad sample of U.S. acquisition o¤ers, we ...nd that large-market-share law ...rms are regularly called upon to facilitate completion of large, legally-complex o¤ers. Complex o¤ers are often withdrawn but, controlling for complexity, large-share law ...rms are associated with enhanced deal completion. Further, we document that some law
more » ... ment that some law ...rms are consistently associated with deal completion over time, and that acquirers with good deal completion experience use fewer di¤erent law ...rms. Acquirers' risk-adjusted returns, though, are smaller around announcements of o¤ers advised by large-share law ...rms. Post-o¤er long-run returns of the acquirers'are also lower and often negative following o¤ers advised by large-share law ...rms. We ...nd no evidence that particular law ...rms are consistently associated over time with strong returns. Our conclusion is that large law ...rms enhance deal completion in di¢ cult situations, consistent with the aims of acquirer management. However, we ...nd no systematic evidence that these popular law ...rms act as "gatekeepers" in the sense of not wanting to be associated with value-destroying deals.
doi:10.2139/ssrn.520343 fatcat:bv74relcgzagtgwycwoha7owji