Bargaining power of targets: Takeover defenses and top-tier target advisors

This paper examines whether takeover defenses (i.e., poison pills and classified boards) can enhance the bargaining position of the target firm, especially when the target advisor is a top-tier investment bank. I find that classified boards and poison pills are positively linked to target's share of merger gains, target announcement returns, and premiums when the target employs a top-tier advisor and the acquisition is initiated by the acquirer. These results support the argument that top-tier target advisors might be more effective in utilizing takeover defenses in deal negotiations to enhance the bargaining position of their client firms and help them capture higher returns and share of merger gains.