Why pay for M&A?

• Is the target company in an industry with high profit potential?
• Can the acquirer and the target combine to make a more competitive company?
• Is the acquisition price low enough to provide investors with upside?
• Will management integrate the two companies effectively?

Moreover, Capital IQ's presumption is that acquisitions account for a large chunk of an acquirer's stock price performance. However, the introduction of a successful new product or a cost reduction initiative -- either of which might be independent of acquisitions -- could also account for the acquirer's stock price performance.

Furthermore, with the exception of the acquisition price, the M&A adviser has little influence on these factors.

What, then, accounts for the high fees paid to M&A advisers? Most CEOs have limited M&A experience and they perceive that hiring a branded adviser -- of which there are a small number who seem to keep prices high -- will offer an insurance policy in case things don't work out as planned.

But to attribute an adviser's value to factors that should be under the CEO's control strikes me as a real stretch.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.