We investigate the advertising strategies of firms in mergers and acquisitions. Target firms increase their advertising expenses, on average, by 50% in the quarter before the announcement of a stock deal. Higher offer prices for high-advertising target firms suggest product advertising being a tool to attract investors’ attention, which may result in temporarily increased stock prices. For acquiring firms, we observe no increase in advertising before but a significant increase in the week after the announcement of a stock deal. The positive relation between acquirer advertising and the probability of deal completion indicates that advertising can positively influence target shareholders’ attitude towards the deal. Overall, our findings support the role of product market advertising as a strategic tool to affect the outcomes of M&As.
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