Advisory fees and successive MandA deals within the same industry -

Abstract

This paper examines the effect of successive Mergers and Acquisitions (MandA) deals completed within a specific industry on advisory fees earned by investment banks. Our study includes 1570 successive deals completed between the period 1987 and 2013. We find a negative relationship between advisory fees generated in one period versus advisory fees generated in prior periods by the same investment bank for MandA deals within the same industry. We relate our finding to a possible “learning mechanism” through which investment banks may develop effective skills and expertise when advising successive deals within the same industry. This learning mechanism may affect the amount of resources and energy that they deploy to execute successful deals which is assumed to be substantially less. As a direct result, advisory fees earned by investment banks may decrease as well.