Global company divestment activity up 16% this year

The value of global company divestments has reached US$1,113 billion so far this year.  Divestments are defined as the disposal of a business entity or the spin-off of an asset from a wider group. The value of divestment activity has increased 16% on the US$958 billion for the same period in 2016, and up over 40% on figure from five years ago. While values have increased, volumes of divestments have dipped 3.1%, from 11,923 in 2016 to 11,555 so far this year.  

In the UK, the value of divestments has increased by 70%, from US$40 billion last year to US$67 billion this year. Meanwhile divestment volumes have decreased by 7% from 652 in 2016 to 607 divestments this year.

Iain Macmillan, Deloitte’s Global Head of M&A Services, comments: 

“The average size of a divestment is rising as businesses see this activity as a legitimate part of their growth plans, even divesting larger parts of the organisation. Leaders increasingly feel that continuing to own an underperforming business might not be the best use of scarce capital. 

“Private Equity is getting more involved on the buying side, particularly in the UK, for example with Shell divesting its North Sea assets to Private Equity. Overall, even with political and economic uncertainty, companies are taking a longer term view.”

However future uncertainty is a concern for 123 global organisations recently involved in a divestment and surveyed by Deloitte this year. Over half the respondents (54%) expect divestments to get more challenging in the next 12 months due to market uncertainty. 

Natalie Hall, Deloitte’s Transaction Services Divestment lead concludes: 

“In the current climate, actually divesting a non-core business is not getting any easier, especially given buyer universes are becoming more diverse and demanding. That is why preparation and providing more analytical data during the divestment process is key, as noted by over half of the respondents. Another challenge lies around Transactional Service Agreements (TSAs), which can last as long as 7-12 months in over half of the cases.”

Ends

Note to editors

• The year to date data on divestment values and volumes runs 1 Jan - 31 October 2016 and 2017. 
• Thomson One was used as the source of data, taking into consideration only announced and completed deals. Thomson defines Divestiture as follows: divestiture means there is a loss of majority control; the parent company is losing a majority interest in the target or the target company is disposing of assets.
• Deloitte’s report on sentiment around divestments is a survey of professionals from 123 global organisations who have recently been involved in divestment, and with revenues greater than US $500 million. The survey was conducted in July 2017, and was followed by a series of interviews with senior executives experienced in delivering divestments.

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