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We interviewed Australian corporate heads of M&A and identified key trends influencing deal activity and the expected impact of COVID-19 to their business in 2020. You can download our full The deal in focus report for data findings from our interviews and actionable insights from our M&A leaders.
Below, we share the highlights from our theme, Divestments.
Key actions for sellers
Protecting and maximising value
The ongoing economic pressure will likely lead to divestment of both non-core and highly sought-after assets that do not typically come to the market.
With a limit on potential buyers, sellers should be cautious divestments do not result in transaction prices substantially below their fundamental values.
Private equity and cash-rich domestic corporates are well positioned as possible buyers, and sellers need to engage with them well in advance to smooth the sale process.
Understanding who potential buyers are will help in preparing and positioning assets for sale, as will thinking through the end game, as this can influence the value when exiting non-core assets.
There are three ways sellers can protect and maximise value from divestments:
These factors can be the difference between getting a deal done and a buyer walking away.
The divestment dynamic building in the corporate world will continue to gather speed. A critical part of the planning is analysis of the value of assets to inform divestment decision making, as their overall value may materially improve if poor performing assets are sold off.
Boldness will be required with divestments to avoid them weighing down the agility of the rest of the business for the ‘next normal’.
As a seller, a clear separation plan outlining the operational complexities of exiting the business, value enhancement opportunities for a buyer to consider (through adopting a buyer’s mindset), possible business risks and mitigating strategies for divesting and exiting are all critical now more than ever.
Sellers who are successful in communicating these effectively – from the way it’s operated today, to the implications of COVID-19 on the cost and value and potential synergies for buyers – will be more likely to deliver better returns.
Divestiture trigger points
Read the next blog in our M&A series on Why accelerating your digital transformation will pay dividends.
Or download our full The deal in focus report for data findings and insights from our interviews with ASX200 M&A leaders.
Jamie leads the national practice of Transaction Services. He has specialised in transaction services since 1998, with extensive experience working with both purchasers and vendors on transactions. Jamie’s clients have included both corporate and private equity clients. Jamie has worked in Australia and the United Kingdom and on cross border transactions including Europe, USA and Asia. He is a chartered accountant and a graduate of the Australian Institute of Company Directors.
Wouter is a Partner in the M&A, Integration and Separation team. He has over 12 years of merger and acquisition consulting experiences and specialises in advising corporate clients with the design, planning and delivery of (cross-border) mergers and carve-outs. Wouter has worked across most industries with a focus on consumer goods, financial and professional services, life sciences, communications, media and entertainment.
Tony provides Mergers and acquisitions lead advisory services to both private and public companies on mergers, acquisitions, divestments, public and private capital raising transactions. He has in excess of twenty five years experience across a broad range of industries including Consumer, TMT and Services Businesses. He has individually led or overseen in excess of 150 transactions in his career.