The Value of 'Boutique' Financial Advisors in Mergers and Acquisitions

Over the period of 1995-2006, about 19% of acquirers and 25% of targets hire boutique banks as their M&A advisors. The expertise of boutique advisors in M&A advisory services may identify them as niche players in the industry. This paper is the first to investigate how merging firms choose between boutique and full service advisors and how this choice affects deal outcomes in M&A transactions. Firms are more likely to choose boutique advisors when facing a deal with greater complexity. After controlling for the endogenous choice of advisors by merging firms, we find that the deal premium paid in mergers is lower if boutique advisors are used on the acquirer side, indicating that acquirers’ shareholders benefit from the expertise of boutique advisors. On the other hand, we do not find that boutique advisors charge higher advisors fees, suggesting that boutique players are pressured by fierce competition from full service banks for market share.