DISTRESSED ACQUICITIONS: WHO IS TARGETING WHOM?

The purpose of this is study is to empirically investigate whether financially strong firms acquire financially distressedor bankruptfirms when there is high asset specificity in order to reap the benefits of synergy creation or whether distressedfirms acquire growth firms in order to diversify their line of business and revive growth. My research demonstrates that financially strong firms acquire distressed companieswhen there is high asset specificity generatingnegativelong-term returns.Additionally, companiesare more likelyto use credit lines in additionto cashwhenthere is high asset specificityin order to finance an acquisition and have access to them even in periods when they didn’t execute any acquisitions.