Choosing exit routes for underperforming assets: a contingent framework for asset management companies

Abstract

Abstract

The reallocation of state-owned capital is bringing a growing number of non-core and underperforming assets to market. Although many of these assets retain productive value, they differ in whether their existing use remains viable, whether suitable industry buyers can acquire them, and whether an alternative use can be established at reasonable cost. Treating them as a single class of distressed assets can lead to inefficient holding, financing, or redevelopment decisions. This paper develops a contingent framework for choosing among three divestiture routes: sale to an industry buyer, sale to financial or other non-industry investors, and limited repurposing before sale. Each route addresses a different constraint: weak buyer capacity, high information and due-diligence costs, or uncertainty about alternative use. The paper then explains how asset management companies can support each route through debt restructuring, creditor coordination, improved disclosure, buyer identification, and carefully limited investment. The framework shifts attention from the volume of assets acquired to the quality of route selection and the value realized through transfer to a more suitable owner.