Selling to Buy: Asset Sales and Acquisitions

44 Pages Posted: 18 Nov 2016 Last revised: 6 Feb 2020

See all articles by Christos P. Mavis

Christos P. Mavis

University of Surrey - Surrey Business School

Nathan McNamee

University of Surrey - Surrey Business School

Dimitris Petmezas

University of Surrey - Surrey Business School

Nickolaos G. Travlos

University of Surrey; ALBA Graduate Business School

Date Written: September 27, 2019

Abstract

This study explores the impact of joint corporate asset restructuring decisions where firms sell an asset in order to fund a subsequent acquisition (selling-to-buy). We find that firms with asset sales are associated with increased acquisition probability. The effect is more pronounced for financially constrained firms. We also show that, in addition to the established improved firm efficiency from focus-increasing asset sales, financially constrained firms obtain the necessary funds to conduct focus-increasing acquisitions, improving further their efficiency. This translates into both higher long-run operating performance and stock abnormal returns at the asset sale announcement.

Keywords: Asset sales, Acquisitions, Restructuring, Operating efficiency, Abnormal returns, Financial constraints

JEL Classification: G14, G32, G34

Suggested Citation

Mavis, Christos P. and McNamee, Nathan and Petmezas, Dimitris and Travlos, Nickolaos G., Selling to Buy: Asset Sales and Acquisitions (September 27, 2019). Journal of Corporate Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2872146 or http://dx.doi.org/10.2139/ssrn.2872146

Christos P. Mavis

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

HOME PAGE: http://www.surrey.ac.uk/people/christos-p-mavis

Nathan McNamee

University of Surrey - Surrey Business School ( email )

Rik Medlik Building
Guildford, Surrey GU2 7XH
United Kingdom

HOME PAGE: http://www.surrey.ac.uk/sbs/people/nathan_mcnamee/

Dimitris Petmezas (Contact Author)

University of Surrey - Surrey Business School ( email )

Guildford, Surrey GU2 7XH
United Kingdom

Nickolaos G. Travlos

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

HOME PAGE: http://www.alba.edu.gr

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