Investment Banks as Financial Advisors in Malaysian Mergers and Acquisitions

2017 ◽  
pp. 25-38
Author(s):  
Kien Cao Dinh ◽  
Thuy Nguyen Thu ◽  
Phuong Nguyen Minh
Keyword(s):  
Investment Banking ◽  
Investment Banks ◽  
Financial Advisors ◽  
Debt Ratio ◽  
Complex Environment ◽  
Publicly Traded ◽  
Investment Bank ◽  
Technology Sector ◽  
Financial Advisor ◽  
Target Firms

Our study examines the factors that affect the choice of hiring an investment bank as financial advisor in the merger and acquisition transactions of Malaysian acquirers. In the period from January 1995 to December 2012, approximately 38.6 percent of the Malaysian acquirers hire an investment bank when conducting M&A transactions. On the other hand, 23.8 percent of the target firms employ at least one investment bank as financial advisor when dealing with Malaysian bidders. Our findings reveal that both participants tend to hire an investment bank when the acquirer operates in the technology sector, the deal takes place in a crisis period and the value of the transaction is high. An acquirer who has a high debt ratio is less likely to employ an investment bank and a publicly traded target is more likely to employ an investment bank in their M&A transactions. Moreover, our results show that, in a complex environment, the hiring of an investment banking is not for the valuation purpose.

scholarly journals Why bidding firms do not hire financial advisors in mergers and acquisitions

2008 ◽  
Vol 5 (3) ◽  
pp. 316-323
Author(s):  
Wallace N. Davidson III ◽  
Shenghui Tong ◽  
Richard Proctor
Keyword(s):  
Mergers And Acquisitions ◽  
Transaction Costs ◽  
Information Asymmetry ◽  
Control Sample ◽  
The Other ◽  
Investment Banks ◽  
Financial Advisors ◽  
Primary Reason ◽  
Investment Bank ◽  
Acquiring Firms

In this paper, we examine why some bidders decide not to hire investment bank advisors in M&A transactions. We build a sample of 181 M&A transactions in which the acquiring firms do not hire investment bank advisors, and compare them with a control sample of 181 M&A transactions in which the acquiring firms hire investment bank advisors. We find that the transaction costs are the primary reason that investment banks are hired as advisors for bidders in M&A transactions. In addition, the information asymmetry and contracting costs are the other two reasons that bidders hire investment banks in M&A transactions.

Freeport-McMoRan: Financing an Acquisition

2017 ◽  
pp. 1-19
Author(s):  
David P. Stowell ◽  
Peter Rossmann
Keyword(s):  
Capital Markets ◽  
Credit Ratings ◽  
Investment Banking ◽  
Equity Capital ◽  
Debt Financing ◽  
Investment Banks ◽  
Publicly Traded ◽  
Optimal Capital Structure ◽  
Optimal Capital

Freeport-McMoRan's acquisition of Phelps Dodge created the world's largest publicly traded copper company. JPMorgan and Merrill Lynch advised the acquirer and arranged $17.5 billion in debt financing and $1.5 billion in credit facilities. In addition, these two firms underwrote $5 billion in equity capital through simultaneous offerings of Freeport-McMoRan common shares and mandatory convertible preferred shares. These financings created an optimal capital structure for the company that resulted in stronger credit ratings. The activities of the equity capital markets and sales groups at the underwriting firms are explored and the structure and benefits of mandatory convertible preferred shares is explained.To understand the role of investment banks in advising a large corporation regarding an acquisition and related financings in the capital markets. As part of this, the activities of an investment banking firm's equity capital markets group and their underwriting risks are analyzed. Finally, the structure of a mandatory convertible security is reviewed in terms of benefits to both issuers and investors.

Quintiles IPO

2017 ◽  
pp. 1-24
Author(s):  
David P. Stowell ◽  
Vishwas Setia
Keyword(s):  
Private Equity ◽  
Life Sciences ◽  
List Type ◽  
Publicly Traded ◽  
Discounted Cash Flow ◽  
Investment Bank ◽  
Strategy Process ◽  
Firm Owners ◽  
A Company

Quintiles Transnational Holdings Inc., the largest global provider of biopharmaceutical development and commercial outsourcing services, grew its revenue at a CAGR of 7.3% and EBITDA at 13.9% between 2008 and 2012.The case is set in December 2012–April 2013, when the majority of the firm was owned by founder Dennis Gillings and four private equity firms (Bain Capital, TPG Capital, 3i Capital and Temasek Life Sciences) after it was taken private in a management-led buyout in 2003 and a subsequent buyout in 2008. Five years after the second buyout, the private equity firm owners were looking to monetize their positions and considered different strategic alternatives: M&A sale to strategic or financial buyers, IPO, or capital restructuring through special dividends.Students will step into the role of an associate at the lead investment bank working with Quintiles. They must consider the case information and determine an IPO strategy, process, potential conflicts, and valuation.After reading and analyzing the case, students will be able to: Apply valuation techniques (discounted cash flow (DCF) and publicly traded comparables) in pricing an IPO Analyze the roles of different parties involved in the transaction Discuss the process of a company filing for an IPO Evaluate different strategic alternatives available to a private equity—backed company Address conflict of interest in management—led buyouts

Does financial advisor quality improve liquidity and issuer benefits in segmented markets? Evidence from the municipal bond market

2018 ◽  
Vol 30 (4) ◽  
pp. 440-458
Author(s):  
Kenneth Daniels ◽  
Jack Dorminey ◽  
Brent Smith ◽  
Jayaraman Vijayakumar
Keyword(s):  
Bond Market ◽  
Current Data ◽  
Financial Advisors ◽  
Municipal Bond ◽  
High Quality ◽  
Regression Estimate ◽  
Content Type ◽  
Financial Advisor ◽  
Revenue Bonds ◽  
The Impact

Purpose Using a unique sample of about 563,000 competitively bid municipal revenue bonds with financial advisors issued during the period 1998–2012, the purpose of this paper is to examine the role and influence of financial advisor quality in the municipal bond market. Design/methodology/approach The authors use a sample of about 563,000 competitively bid municipal revenue bonds with financial advisors issued during the period 1998–2012. The authors estimate a selection model where the authors identify the factors leading to the selection of a high-quality financial advisor. The authors then, using the inverse mills ratio from the first regression, estimate the association of high-quality advisor (and other factors) with the cost of borrowing. Findings The results suggest that high-quality financial advisors provide a credible signal to market participants about issue and issuer quality. This signal translates to a greater number of bids for issues that use high-quality financial advisors, resulting in improved liquidity and lower borrowing costs for these issues. The results also show that the beneficial effects obtained by using higher quality financial advisors are prevalent across all categories of issues such as for refunding and non-refunding issues, and for both insured and non-insured issues. The benefits are also generally observed for issues of most size categories. The results also suggest that the passage of the Dodd–Frank Act requiring mandatory registration of financial advisors and enhanced scrutiny has only increased the benefits to issuers from using higher quality financial advisors. Originality/value This paper differs from previous research in several important ways. First, the study is, to the authors’ knowledge, the first study that explores the relationship between financial advisor quality and liquidity in the municipal sector. The authors show using higher quality financial advisors enhances liquidity for the issues by attracting a significantly large number of bids. Second, the sample is exclusively comprised of competitively bid revenue issues all of which rely on financial advisors. This enables us to examine more unambiguously the influence of financial advisor quality, without the confounding effects of issues without financial advisors. Third, time coverage (1998–2012) and size of the sample (roughly 563,000 bond issues) enables us to conduct varied sub-sample analyses with greater power since the resulting sub-sample partitions themselves are of very large size. This provides better and additional insights into the role of financial advisor quality. The more current data when compared to prior research enables us to examine the impact of financial advisor quality inter-temporally with special attention devoted to the period after passage of the Dodd–Frank Act.

scholarly journals The Role of Investment Banking in M&A Operations: Empiric Pre and Post Lehman Evidence

2014 ◽  
Vol 1 (2) ◽  
pp. 51
Author(s):  
Vincenzo Capizzi ◽  
Renato Giovannini
Keyword(s):  
Investment Banking ◽  
Total Sample ◽  
Time Frame ◽  
Investment Banks ◽  
Measuring System ◽  
Lehman Brothers ◽  
Time Frames ◽  
The Impact ◽  
The Relationship

The role of investment banks in M&A operations is analyzed on the basis of empiric evidence. In particular, to point out the variations in the impact of the certification effect which can be ascribed to investment banks, the relationship between the value created for the shareholders in companies involved in special underwriting operations and the reputation of the banks appointed to act as advisors is examined. The analysis, which uses an original measuring system in order to assess and classify the reputation variable, focuses on transactions that have taken place between listed companies in two time frames, symmetrical to each other, specifically pre and post the Lehman Brothers bankruptcy. The total sample is composed of 229 transactions, divided into 161 and 68 observations, respectively pre and post Lehman. The result is that in the post Lehman period, unlike the preceding time frame, for which no significant empiric evidence is found, the wealth of the shareholders (of both targets and acquirers) is significantly influenced by the reputation of the investment banks which have acted as advisors. This indicates that, subsequent to the shock of the Lehman Brothers collapse, the certifying effect of the investment banks takes on an important role in the shareholders' choice.

Factors influencing the choice of financial advisor by women stock investors in Punjab

2017 ◽  
Vol 59 (2) ◽  
pp. 192-201
Author(s):  
Mandeep Kaur ◽  
Tina Vohra
Keyword(s):  
Service Providers ◽  
Age Groups ◽  
Financial Advisors ◽  
Women Clients ◽  
Content Type ◽  
Financial Advisor ◽  
Investment Advisor ◽  
The Impact ◽  
Structured Questionnaire

Purpose The paper aims to attempt to identify the attributes that women look for in their financial advisor and to examine if the choice of attributes of a financial advisor among women investors in Punjab is the same across demographics. The understanding of the attributes that women want in their financial advisor will help the financial advisors to be mindful of the opportunities and the challenges they have to face while working with women investors. Studying the impact of demographics on the choice of the investment advisor would enable the service providers to provide women with services relevant to their unique and individual situations. Design/methodology/approach A pre-tested, well-structured questionnaire was constructed and administered personally, and the responses of 200 women investors were analyzed. The sum of the ranks assigned by women to various attributes determining the choice of a financial advisor was used to find out the most preferred attribute on the basis of which women choose their financial advisor. The Kruskal Wallis test was used to analyze the impact of demographics on the choice of the respondents. Findings The results of the study brought out that the friendliness of the financial advisor, and the quality of advice provided by them are preferred attributes determining the choice of a financial advisor. Along with this, the results also state that the preference for the attribute friendliness and quality of advice is not the same across age groups. The choice of attributes also varies according to the marital status of the respondents. Practical implications The current study will contribute toward a greater understanding of the attributes which are considered important by women while choosing their financial advisor. The study will help the financial advisors to cater to the needs of their women clients. Moreover, the study will also benefit women by bringing about a positive change in the attitude of the financial advisors in favor of them. The greater sensitization of the financial advisors toward their women clients would lead to greater stock market participation among women, thereby benefitting the society. Originality/value The paper is an attempt to identify the attributes that women look for in their financial advisor and to examine if the choice of attributes of a financial advisor among women investors in Punjab is the same across demographics or not. Therefore, the study contributes to the understanding of the investment behavior of women.

Factors Associated With Hiring and Firing Financial Advisors During the Great Recession

2019 ◽  
Vol 30 (2) ◽  
pp. 289-303
Author(s):  
Yuanshan Cheng ◽  
Charlene M. Kalenkoski ◽  
Philip Gibson
Keyword(s):  
Great Recession ◽  
Financial Services ◽  
Significant Loss ◽  
Economic Downturn ◽  
Financial Advisors ◽  
Net Worth ◽  
The Great Recession ◽  
Financial Advisor ◽  
Client Relationship ◽  
Hiring And Firing

From 2007 to 2009, the U.S. economy went through a deep economic downturn which is popularly known as the Great Recession. It resulted in a significant loss of wealth for many investors. While some investors sought the advice of financial advisors; others did not. This study examines the economic situation of households using the National Longitudinal Survey of Youth (NLSY) and analyzes the financial advisor–client relationship during the Great Recession to determine who fired or hired a financial advisor during this period. The results indicate that losing money, measured by a decrease net worth, was not the main reason why clients fired their financial advisor during the Great Recession. Interestingly, the results also show that experiencing a decrease in net worth was not the main reason why individuals pursued the services of a financial adviser during this period. Instead, current income and an increase in income were the primary factors that impacted the client–advisor relationship during the financial crisis. These results are consistent with consumer demand theory in which financial services are a normal good that people purchase less of when their income falls.

Morgan Stanley raises women’s interest in investment banking

2014 ◽  
Vol 22 (7) ◽  
pp. 12-14 ◽  
Author(s):  
David Pollitt
Keyword(s):  
Design Methodology ◽  
Early Stage ◽  
Investment Banking ◽  
Work Life ◽  
Investment Bank ◽  
Life Balance ◽  
Content Type ◽  
Outreach Work ◽  
Female Specific ◽  
Practical Implications

Purpose – The purpose of this paper is to observe how Morgan Stanley is seeking to overcome misconceptions about the nature of investment banking, concern over work–life balance and fears of the existence of a glass ceiling. Design/methodology/approach – It outlines the bank’s various initiatives to connect with women during their studies or at an early stage in their careers. Findings – It highlights the importance of outreach work with schools and universities, plus the key role played at the bank by women’s networking groups. Practical implications – It reveals that the company won the 2013 Opportunity Now inspiring the workforce of the future award for its initiatives aimed at increasing the proportion of women in its top jobs. Social implications – It reveals how a major investment bank is seeking to challenge the macho image of investment banking. Originality/value – It explains that Morgan Stanley reached more than 1,600 women at female-specific events in 2012 alone. It views this approach to building a female talent pipeline as a multi-year strategy.

A Novel Integrated AHP-QFD Model for Investment Banks

2014 ◽  
Vol 548-549 ◽  
pp. 1959-1964 ◽  
Author(s):  
Hooman Mihanzadeh ◽  
Yulizar Widiatama ◽  
Marzieh Geramian Nik ◽  
Hamed Gholami ◽  
Zahra Akbardoost Laskoukalayeh
Keyword(s):  
Quality Function Deployment ◽  
Relative Weight ◽  
Design Tool ◽  
Decision Makers ◽  
Investment Banks ◽  
Investment Bank ◽  
Proposed Model ◽  
Hierarchy Process ◽  
Internal Relationships ◽  
Structured Questionnaire

This paper proposes an effective model to integrate shareholders’ requirements with regard to Bank’s investment categories in an effort to rank the best project portfolios in order of importance whereby they reap the benefits of their secured investments. This study attempts to utilize Quality Function Deployment (QFD) in an investment bank sector, a customer oriented design tool which starts with House of Quality (HOQ). In this manner, Analytical Hierarchy Process (AHP) approach was employed to fulfill the intended HOQs through measuring the relative importance of shareholders’ needs as well as finding the relative weight of each investment more precisely. For this purpose, a well-structured questionnaire initially should be developed to identify the selection-criteria “wants” and thereby analyzing the intensity of internal relationships through cooperation with the Bank’s Decision makers (BDMs). The results of project portfolio selection revealed that Project D has been nominated as the most potential investment category, followed by Project C, Project B, Project E and Project A. Hopefully, with implementation of the proposed model, investment banks will become more adaptive and competitive.

Sign in / Sign up

Export Citation Format

Share Document