Americas CFO Hot Topics
Seventy-seven percent of companies plan to accelerate their divestment strategy, according to a recent EY survey. CFOs are championing divestments as a tool to support growth and align their portfolio with their business objectives.
Companies that take a wait-and-see approach to divestments may miss growth opportunities – buyer competition helped 40% of corporate sellers drive up values in their most recent divestment. Every day that a CFO waits to evaluate its capital strategy, another company gains an advantage.
There is no “just get rid of it” when it comes to divestments. Rushing through a sale can blur potential strategic opportunities or cause CFOs to leave money on the table, as 73% of surveyed companies have done. Or worse, a failed deal could tarnish the company’s reputation.
Divestments – find out more
Richard Jeanneret, Deborah Byers and Paul Hammes from Ernst & Young discuss how to divest successfully and what divestments mean for CFOs. [See a transcript of this video]
CFO divestment toolkit
Sellers’ stakeholders demand assurance that transaction objectives are achievable, while buyers scrutinize deals more carefully than ever. CFOs must focus on five practices to help meet stakeholder expectations and maximize divestment success:
- Conduct structured and regular portfolio management
- Consider the full range of potential strategic and financial buyers
- Articulate a compelling value and growth story tailored to each buyer, including synergy and cost analyses
- Prepare rigorously for the divestment process, including performance improvements
- Understand the importance of preparation planning, including a road map for business functions, tax planning, reporting, transaction service agreements and stranded cost management
Following this comprehensive approach can result in greater top-line growth, a higher purchase price and lower stranded costs.
With divestments on the rise, CFOs need to act as strategic partners to CEOs in driving the company’s capital strategy. CFOs must carefully consider the performance of each portfolio component and assess whether it is aligned with broader strategic goals. CFOs should carefully prepare the business unit for sale in order to maximize its value, complete the deal quickly and then continue to focus on growing their core business.
View our latest resources on divestments
- Maximizing divestment success
- Global corporate divestment study [PDF]
- Human capital carve-out study: strategies for success [PDF]
- Divesting for value
- Tax issues and consequences
- Maximizing divestment success [webcast]
- Read more at: http://www.ey.com/US/en/Services/Transactions/Divestiture-Advisory-Services