Divestiture Survey

In our most recent Global Corporate Divestiture Survey, we look into the dynamic landscape and evolving trends in divestiture and its role within corporate strategy. This survey encapsulates not just the latest divestiture patterns but also underscores its shifting significance in the realm of corporate strategy.

Furthermore, we also got to chat with some M&A experts from the Nordics, offering valuable perspectives and recommendations from the region’s professionals.

The global M&A market for divestitures witnessed a rollercoaster ride in the wake of the COVID-19 pandemic. While 2020 saw a dramatic slowdown due to economic uncertainty, 2021 experienced a rapid rebound, particularly in the Nordic region. However, this fervor has subsided in 2023, marking a significant shift in market dynamics.

Pandemic Impact and Nordic Rebound - The initial pandemic shock led companies to strategically shed non-core assets in 2020 to bolster liquidity. However, by 2021, divestiture activity tapered off as the market became saturated with potential sellers. The Nordic countries, however, bucked this trend with a notable rebound in deal activity, likely due to their inherent economic strength.

Market Stabilization and Continued Divestiture - While the overall volume and value of divestitures have declined in 2023, our recent survey reveals a persistent trend. Over four-fifths of surveyed companies across the past three years (ending in 2024) have executed at least three divestitures, highlighting the ongoing strategic importance of portfolio optimization.

Driving Forces Behind Divestiture decisions:

• Economic Turmoil: Economic downturns can prompt companies to realign their portfolios and shed non-essential assets.
• Strategic Alignment: Divestitures can help companies streamline operations and focus on core business objectives.
• Cost Management: Divestitures can be a strategic response to high costs associated with maintaining certain assets.
• Growth Management: By shedding non-core assets, companies can free up resources to invest in areas with higher growth potential.
  

The divestiture landscape has undergone a significant shift since the pandemic. While a decline in activity is evident, the underlying strategic rationale for divestitures remains strong. Companies continue to leverage this approach to optimize their portfolios, navigate economic challenges, and pursue long-term growth objectives.

Nordic dealmakers have a strong opportunity to maintain momentum by adeptly managing both global and local market trends.

Globally, despite higher sales figures, financial distress often overshadows the M&A landscape, impacting strategic planning significantly. Private equity's growing role in future acquisitions is a key consideration influencing decision-making processes. With consolidation patterns varying widely across industries and regions, tailored strategies are essential to navigate diverse market landscapes effectively. Sectors with lower consolidation levels witness ongoing divestiture activities, emphasizing the importance of proactive portfolio management for maintaining competitiveness.

In the Nordic region, the divestiture market demonstrates resilience despite challenges, with sales figures generally lower than those in the US and UK but fewer instances of financial distress. Anticipated private equity activity and high consolidation rates in mature industries shape market dynamics. However, certain sectors such as Construction, Business Process, Accounting, and Tech exhibit lower levels of consolidation sectors exhibit lower levels of consolidation, leading to ongoing divestiture activities aimed at portfolio optimization and adaptation to market trends.

In Norway, historically fewer large M&A divestiture deals have occurred compared to the broader Nordic market, although recent trends indicate an uptick. The presence of fewer large industrial conglomerates likely contributes to this phenomenon.

Sectorial Trends and spotlight on Financial Services and Technology are Driving M&A Activity in the Nordics

In the Nordic region, various industry sectors are currently experiencing significant levels of divestiture activity, both domestically and internationally. Companies across sectors such as Construction, Business Process, Accounting, and Technology are actively refining their portfolios, demonstrating a consistent trend of divestiture. Similarly, in the Telecom and Energy sectors, divestiture efforts are primarily driven by strategic capital allocation strategies, emphasizing the significance of optimizing capital deployment and focusing on core business objectives.

A notable trend emerges within the Nordic Financial Services and Life Sciences & Healthcare sectors, where companies exhibit a pronounced inclination towards selling to publicly listed entities. This inclination indicates a deliberate strategic realignment and consolidation within these specific industries. Conversely, the Consumer and Technology, Media, and Telecommunications (TMT) sectors stand out for their higher prevalence of spin-offs and IPOs compared to other sectors.

Overall, heightened divestiture activities observed across Nordic sectors are propelled by strategic imperatives such as portfolio refinement, effective capital allocation, and industry consolidation.

Nordic organizations face divestiture pitfalls such as underestimating separation complexity and reducing stranded cost. Deloitte tackles these challenges proactively through meticulous due diligence, tailored separation plans, and ongoing stakeholder communication. Our approach empowers Nordic organizations to mitigate disruptions and optimize value during divestiture.

The Nordic Approach to Divestitures in a Shifting Market Landscape

In the landscape of divestiture trends, Nordic sellers have shown an inclination towards utilizing divestitures as catalysts for transformative endeavors. This involves a strategic refocusing on core business operations and the pursuit of growth initiatives. Notably, successful companies have been diligent in articulating a clear strategic rationale behind each divestiture, whether it be reinvesting sale proceeds into areas such as environmental, social, and governance (ESG), achieving cost efficiencies, enhancing profitability, or fortifying cash reserves. Furthermore, Nordic sellers exhibit proficiency in other critical facets of divestiture success, including meticulous deal planning and structuring, as well as effective communication with investors regarding their divestiture strategies.

Looking forward, Nordic dealmakers are poised to maintain momentum by navigating both global and local market trends. Globally, the anticipated economic upswing propelled by supply-side and demand-side factors is expected to stimulate an uptick in M&A activity, barring any adverse economic shocks such as new coronavirus variants, geopolitical disruptions, or heightened inflation. On a local scale, the prevalence of tech-related deals continues to surge, particularly in sectors like Fintech, Healthcare Technology, Software, and IT Services— areas where the Nordics excel. Given the prevailing turbulent environment and the uncertainties surrounding the forthcoming super election year, formulating strategies for both offensive and defensive M&A maneuvers become increasingly pertinent.