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Title: Selling to buy : asset sales and mergers and acquisitions
Author: McNamee, Nathan P.
ISNI:       0000 0004 6423 245X
Awarding Body: University of Surrey
Current Institution: University of Surrey
Date of Award: 2017
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This thesis studies the effects of using proceeds from asset sales as a source of funding for mergers and acquisitions (M&As). The first empirical chapter investigates the financing decisions made by acquiring firms and seeks to test a new theoretical framework proposed by Edmans and Mann (2017) which models a firm’s funding choice between asset sales and equity offerings. Their theory identifies settings in which a firm may prefer to select one financing source over the other, which may result in deviations from traditional financing theories. The predictions of this framework are empirically tested in an M&A setting. The second empirical chapter provides evidence that mergers and acquisitions occur as part of asset restructuring, in which asset sale proceeds are associated with increased acquisition probability. Economically, firms with asset sales have a 17.02% higher likelihood to subsequently make acquisitions. These results are consistent with the notion that asset sales enhance firm capital liquidity, and asset sale proceeds can be used to fund acquisitions, particularly for financially constrained firms. Finally, firms conducting acquisitions after sales of unrelated assets are more likely to experience improvement in long-run operating efficiency. The third empirical chapter establishes that asset sale proceeds are an economically important omitted variable that determines the method of payment in acquisitions. Specifically, the results show that firms with asset sales are more likely to subsequently conduct cash acquisitions, which translates into 42.76% higher likelihood to use cash method of payment. This finding is attributed to increased cash liquidity offered by asset sales. This study highlights the importance of asset sales on the crucial choice of payment method in acquisitions. Overall, the findings of this thesis provide strong evidence that asset sales are an important, but commonly overlooked, source of funds in mergers and acquisitions.
Supervisor: Petmezas, Dimitris ; Mavis, Christos Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available