Abstract
We provide clinical evidence of corporate restructuring at Sears, Roebuck & Co., beginning with the firm's 1981 diversification into financial services by acquiring Coldwell, Banker & Co. and Dean Witter, Reynolds Inc. The initial purchases resulted in a wealth gain to shareholders of approximately $400 million. Anticipated synergies did not materialize, however, and Sears’ retail performance deteriorated. Coincident with pressure from institutional investor activists in 1992, Sears announced the divestiture of financial services and a refocusing on retail operations. This led to a $1.113 billion gain for shareholders. Despite more than $1.5 billion in gains over the entire diversification/divestiture period, Sears’ shareholders suffered a significant opportunity loss when compared with a portfolio of focused firms.
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