Divisional buyouts by private equity and the market for divested assets

Ulrich Hege, Stefano Lovo, Myron B. Slovin, Marie Sushka

Research output: Contribution to journalArticle

3 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)21-37
Number of pages17
JournalJournal of Corporate Finance
Volume53
DOIs
StatePublished - Dec 2018

Keywords

  • Asset sales
  • Auction
  • Divisional buyouts
  • Private equity
  • Restructuring

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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