Are investment bankers good for acquisition premiums?

Since the 1980s, the number of acquisition deals has increased as has the use of investment bankers. Among their many strategic and financial advisory roles, investment bankers negotiate acquisition premiums. Studies have found support for agency conflicts between acquirers and their bankers, resulting in bankers being associated with acquirers' payments of higher acquisition premiums. This study investigates the transaction-specific attributes under which acquirers' bankers are associated with greater acquisition premiums and whether bankers' first-tier status attenuates the premium paid by acquirers when they use bankers. The study examines a sample of 481 acquisitions completed between 1988 and 1998 and finds that the presence of acquirers' bankers along with transaction-specific attributes can influence acquisition premiums.