Stapled Financing, Value Certification, and Lending Efficiency

摘要

We examine whether financing commitments from a target firm's financial advisor, in the form of stapled financing, provide certification of target value. Using a data set of leveraged buyouts spanning 2002-2011, and addressing endogeneity issues, we find that stapled financing has significant positive effects on sellers' shareholder wealth, especially for targets suffering from greater adverse selection. Stapled financing facilitates deal financing by allowing buyers to obtain lower-cost and longer-maturity debt, and it is positively associated with bidding intensity. Investment banks offering stapled financing appear to trade off higher expected advisory fees against loss of lending efficiency ex post.