Investment Banks as Financial Advisors in Malaysian Mergers and Acquisitions

Abstract

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.