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The benefits of buying distressed assets


Journal of Applied Corporate Finance



Authors / Editors

Meier J-M;Servaes H


Publication Year



When companies in financial difficulty are forced to sell assets—especially real assets such as factories, business units, real estate, or the entire company—the news is often seen as negative all around. In these situations, referred to as “fire sales,” companies are forced to sell assets below fair value, and the spillover effects can be costly as well. These spillover costs, or “externalities,” include plant closings and job losses that hurt employees, suppliers, and customers. Fire sales can also depress the values of the assets of healthy companies in the same industry.

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