Europe leads as global divestments soar nearly 80% in 2014
15 March 2014
Global divestment activity has increased sharply in 2014, up 79% in the first two months of the year. 50 deals worth $16 billion have been reported, compared to 28 worth $11.6 billion, according to analysis from Deloitte.
Europe accounted for 53% of all divestments sales in 2013. This contrasts to a sharp decline in divestments in North America (down from 32% in 2012 to 23% in 2013) and the UK (down from 17% in 2012 to 7% in 2013).
Dan Beanland, head of divestments at Deloitte, said: “Europe is now divesting a great deal more than anywhere else in the world. A large amount of corporate rationalisation is boosting supply as private equity houses look for attractive divested businesses to turn around. We are also seeing an increasing number of smaller, tactical deals, which have pushed deal volumes up, but values down.
“Divestments are becoming a matter of strategy more than survival as companies look at ways to enhance performance by repositioning for growth. Divesting produces the dual benefit of increased cash from a sale which can be invested to expand higher growth segments, coupled with a sharper focus on a smaller, more nimble portfolio.”
Since 2009, companies globally have made over $500bn worth of (vendor initiated) divestments.
Dan Beanland concluded: “We expect to see more divestments in 2014 as companies respond to pressure from shareholders, activists and analysts to demonstrate how their corporate strategy is aligned with their M&A strategy.
“Based on a review of FTSE 100 annual reports, investor presentations and analyst comments, we consider only a quarter of the companies are being truly transparent in their market communications. Good communicators include HSBC and Aviva, and a number of outside pressures, including shareholder activism, will force other companies to be clearer about their divestment strategies.
“Analysis has shown us that 63% of sellers where divestment activity exceeded $500 million outperformed their relative index from 2006-12, so it can be a great way of adding value.”
Notes to editors
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.
The information contained in this press release is correct at the time of going to press.
Member of Deloitte Touche Tohmatsu Limited.
“Europe is now divesting a great deal more than anywhere else in the world. A large amount of corporate rationalisation is boosting supply as private equity houses look for attractive divested businesses to turn around"-Dan Beanland, head of divestments at Deloitte