The Role of Public Relations Advisors in Acquisitions

U.S. bidders that employ top-tier public relations (PR) advisors in the M&A process during 1998-2022 earn announcement returns that are 0.78% higher than firms without top-tier or any PR advice. This effect is entirely due to transactions where the target is not public, which are deals for which information about the target is sparser, and communication is more important. For this sample, the additional return is 1.33%. The effect is also more pronounced for smaller bidders and bidders with less analyst following. There is no return reversal in the long run, which suggests that the effect is not due to spin. Propensity score models and instrumental variable regressions support our causal interpretation of the results. Collectively, our evidence supports the view that PR advisors are employed to improve deal quality thanks to their ability to communicate effectively with various stakeholders, and, as such, increase the likelihood that the proposed merger benefits can actually be achieved.