The Impacts of Conflicting Interests of Investment Banks on Swedish Mergers and Acquisitions

Abstract: Financial advisors are commonly used by both the buying and the selling side in merger and acquisition activities. Generally, the advisors have significant influence on the outcome of the deals. Previous research on merger and acquisitions on the US market has shown evidence that advisors to the acquirer profit on the deals on which they are advising by having a stock position in the target. This position could either be directly or indirectly through other companies within the same financial conglomerate. Advisor stake in target not only increases the probability of a successful deal and increases the premium paid for the target but also reduces the future viability of the deal at the expense of the acquirer. We investigate whether the results from the US market are applicable for Sweden by investigating the period 1999-2006 with point estimates. The results deviate considerably from previous studies on the US, indicating that the situation in Sweden is different; a higher premium is being paid when advisor stake exists, however, without reducing the viability of the deal.