Performance of Acquirers of Divested Assets: "Bottom Fishers" of the U.S. Software Industry



This paper contributes to an improved understanding of the determinants of acquisition performance by focusing on the performance implications of acquisitions of divested assets. While prior research has focused on the dyadic match of acquirer and target characteristics on acquisition performance, our focus is on the triadic match between the characteristics of sellers, buyers, and acquisition targets. We provide a two-staged analysis. First, we examine the differences in the stock market reactions to the announcement of an acquisition of a stand-alone firm in comparison to the acquisition of another firm’s divestiture. Then we examine whether acquirers that buy other firms’ divestitures perform better in the longer term than acquirers that prefer to buy stand-alone firms. We find robust evidence both for higher abnormal returns to acquirer shareholders at the time of the announcement and higher accounting returns for acquirers of divested assets over the longer term. The longer term effect is particularly strong for “bottom fishers” that buy divested assets that are more closely related to their business than to the previous parent’s business.
Contact information:
Carolien Heintjes