Winning megadeals : The dual role of acquirer advisors in loan-financed mergers and acquisitions

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Article number102034
Journal / PublicationJournal of Corporate Finance
Online published3 Jul 2021
Publication statusPublished - Aug 2021


Acquirer advisors now often arrange syndicated loans financing merger and acquisition deals they advise on. This paper shows that such an advisor-lender dual role facilitates valuable big-ticket deals. There is a positive announcement effect for the acquirer which also shows no systematic post-deal underperformance—dispelling concerns about the advisor abetting managerial empire building. But advisor-led syndicated loans, despite being larger in size, have higher loan spreads than those led by non-advisors. Advisors apparently have an information advantage but rent extraction is unlikely. The higher charges are justifiable in view of the significantly lower post-deal creditworthiness of dual-role bidders. Advisor-lender’s superior information about adverse changes in the credit risk is rationally priced into the dual-role interest rate premium.

Research Area(s)

  • M&A, Advisor, Lead arranger, Loan pricing, Dual-role premium