Divisional Buyouts by Private Equity and the Market for Divested Assets

Hege, Ulrich, Lovo, Stefano, Slovin, Myron B. and Sushka, Marie E. (2019) Divisional Buyouts by Private Equity and the Market for Divested Assets. Journal of Corporate Finance. (In Press)

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Official URL: http://tse-fr.eu/pub/32934

Abstract

We study the role and performance of private equity (PE) in corporate asset sales. Corporate sellers obtain significantly positive excess returns in PE deals, gains in wealth significantly greater than for intercorporate asset sales. Based on exit valuations for 98% of PE deals, we find gains in enterprise value in buyouts are significantly greater than for benchmark firms. Corporate seller excess returns are positively correlated with subsequent gains in asset enterprise value. A parsimonious auction model suggests that only restructuring capabilities of PE (not acquisition of undervalued assets) can explain the pattern of the gains generated in these PE deals.

Item Type: Article
Language: English
Date: 2019
Refereed: Yes
Uncontrolled Keywords: Divisional buyouts, asset sales, private equity, restructuring, auction
JEL codes: G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 13 Sep 2018 07:35
Last Modified: 13 Sep 2018 07:35
OAI ID: oai:tse-fr.eu:32934
URI: http://publications.ut-capitole.fr/id/eprint/26249

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