Deal structure decision in the global market for divested assets

We find that the deal structure decision to engage in a foreign asset purchase instead of acquiring a foreign target's equity is more likely when bidders are smaller, the bidder's proportion of foreign sales-to-total sales is higher and the target is in an unrelated industry. In addition, bidders tend to execute asset purchase transactions rather than acquiring a foreign target's equity when the target's corresponding country has a relatively favorable rating for rule of law, control of corruption, political stability and absence of violence, regulatory quality and economic freedom. We also find that bidders engaging in asset purchase transactions experience significantly more favorable valuation effects than those that acquire the equity of target firms. (C) 2012 Elsevier Inc. All rights reserved.