What is a Bust-Up Acquisition?

A bust-up acquisition is the purchase of a business in which the buyer then sells some of the acquiree’s assets in order to pay for the acquisition. This situation is most common when the buyer has funded the acquisition primarily with debt, and the acquiree has a significant proportion of undervalued assets that can be readily sold off. The buyer will not know if this strategy is successful until after it has completed the acquisition transaction, so it takes on a major risk that it can realize significant value from the sale of the acquiree’s assets.