Stapled Financing, Value Certi…cation, and Lending Efficiency

Finance

Further details

These papers examines whether financing commitments from a target firm's financial advisor, in the form of stapled financing, serve as a certification of target value or instead generate lending business for the investment bank. Using a unique dataset on LBOs during 2002-2011 and addressing endogeneity issues, we find that stapled financing has significant positive effects on sellers' shareholder wealth, especially for targets that suffer from greater adverse selection, and allows buyers to obtain lower cost and longer maturity debt financing. Investment banks offering stapled financing appear to trade off higher expected advisory fees against loss of lending efficiency ex post.

Download the paper here: Stapled Financing, Value Certi…cation, and Lending Efficiency