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We provide a comparative analysis of acquirer returns in acquisitions of public firms, private firms, and divested assets. On the basis of a sample of 5,079 acquisitions by U.S. software industry companies during 1988�2008, we find that acquisitions of divested assets outperform acquisitions of privately held firms, which in turn outperform acquisitions of publicly held firms. While the higher returns for acquisitions of divested assets relative to stand-alone acquisition targets can be explained by market efficiency arguments, seller distress and improved asset fit further enhance the positive returns of acquirers of divested assets consistent with the relative bargaining power explanation. Finally, we find that the effects of these buyer bargaining advantages are mutually strengthening and that they also hold for longer-term acquirer performance
