1. Conduct frequent portfolio reviews to keep pace with market changes
Portfolio reviews should be conducted regularly— ideally, every six months — to determine the strategic path forward and whether markets shifted sufficiently to warrant a divestment.
2. Act quickly to maximize value
Once the portfolio review provides compelling insight, management should not hesitate to act on it. Investors in companies that choose to sell non-core units in a low-growth category or with a weak competitive position view such decisions positively. Delaying a sale will likely erode value; by contrast, acting early to maximize value and reinvest capital in areas where it can be most effective often pays off over the long term.
3. Proactively monetize under-exploited assets and non-core projects
Companies can extract value from under-exploited assets through a joint venture or licensing. Yet most companies are not proactive in identifying ways of monetizing their R&D projects: more than half of executives react only to expressions of outside interest and a third said they rarely look to monetize R&D or bring in external financing for projects.
4. Be a serial deal-maker: Don’t leave money on the table
Businesses that regularly evaluate portfolios for monetization opportunities will gain the greatest benefit from successful divestments as they are most likely to be serial dealmakers who are accustomed to monetizing under-utilized assets and, therefore, will not “leave money on the table.”
5. Embrace technological change
Evolving technology has become a major consideration in the portfolio review process. Two thirds of the executives we surveyed say technological change has changed their core strategy; significantly to completely, say half of those.
6. Seek out regional growth opportunities
Divestments can be used to finance expansion into emerging and developing geographies with strong growth prospects.
7. Reallocate capital to the core business
Power and utilities businesses, for example, are reallocating capital freed up from divestments to focus on and reinforce their core business: 50% expect to invest in their existing business, and a further 33% are planning to use sale proceeds to make acquisitions for their core business.
8. Target financial buyers
Prepare early and understand where the value lies for particular financial investors; key to executing a successful sale.
9. Search for hidden value in your portfolio
Look toward using underlying assets rather than only the parent company’s market value, as a basis for valuation. Selling unfashionable units can offer companies a more efficient route to monetization than developing them internally.
10. Look beyond operational challenges
Operational challenges can prevent businesses from being bold in their strategies, even if their portfolio review concludes the need to sell a business unit. Effective planning for business separations can help alleviate those issues that may distract at board level.