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Divisional Buyouts by Private Equity and the Market for Divested Assets

Ulrich Hege (), Stefano Lovo, Myron B. Slovin and Marie E. Sushka

No 18-948, TSE Working Papers from Toulouse School of Economics (TSE)

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.

Keywords: Divisional buyouts; asset sales; private equity; restructuring; auction (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-cfn
Date: 2018-08
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