Divisional Buyouts by Private Equity and the Market for Divested Assets

Résumé

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.

Mots-clés

Divisional buyouts; asset sales; private equity; restructuring; auction;

Codes JEL

G32: Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill
G34: Mergers • Acquisitions • Restructuring • Corporate Governance