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Is it time for a break?
How to maximise divestment success
Our Global Divestment Survey 2017 examines the themes and challenges influencing global divestment activity. We surveyed global organisations to assess their performance in divestment.
The responses provide valuable insights into what our clients and experts consider the key emerging issues in divestment strategy.
- Divestment deal activity remains robust despite uncertain market conditions, however, the difficulty level of achieving successful divestments is increasing. 54% of respondents expect that divestments will be more difficult to deliver in the next 12 months due to external market changes.
- 1/3 of respondents’ recent divestments have failed. The top 3 reasons for this include being unable to get acceptable value, unacceptable deal terms and a change in the external market.
- Most divestments are driven by portfolio optimisation strategies as companies attempt to refocus on a core of businesses and competencies. 53% of respondents strategically evaluate individual businesses only when there are performance or strategic issues, given the uncertain market conditions is this the right approach?
- Increasing numbers of respondents are turning to technology to support their divestment process. 50% had a need for more in-depth and raw data sources to support their
buy sidedue diligence.
- The buyer universe is changing, the Survey shows that companies are more likely to market divestments to corporate buyers than to private equity, and are more likely to market to domestic buyers than to cross-border buyers – yet private equity and cross-border buyers are more likely to complete the deal.
To do list:
|Corporates should regularly review their portfolios using a strategic, structured approach to help derive from value from divestment.|
|Perform an in-depth, pre-divestment readiness assessment supported by data analytics to identify a transaction’s key areas of complexity, interdependency, and preparedness, as well as where value can be delivered versus time/cost benefit.|
|Set firm timelines on whether and when to sign and conclude. If deals drift, there is a risk that less favourable terms may be on offer from a seller’s perspective. However, this might not necessarily be the case from a buyer’s perspective.|
|Consider the advantages of sales to PE and cross border buyers. Look at PE firms if sale objectives include a high price, deal speed and certainty to close.|
“Divestments are now recognised as a core part of an organisations priorities, yet the complexities of how to identify and execute these successfully is changing rapidly. Sophisticated businesses are adapting their strategies to ensure they capture maximum value from these activities”
Iain Macmillan, Global Head of M&A