Global corporate divestment study
Key findings
Empirical evidence from the study, along with our work with clients, has revealed five leading practices that companies should employ to avoid leaving value on the table, and to help achieve a successful divestment.
- Conduct structured and regular portfolio management: Leading companies regularly assess whether their assets are contributing to strategic goals or if the company's capital could be used for other purposes. Similarly, 55% of high performers have a structured process and reviewed their portfolio regularly.
- Consider the full range of potential buyers: Many respondents focus on domestic buyers within the same sector. But by focusing on this narrower buyer universe, sellers may be limiting the value they can extract. Appealing to a broader financial, domestic and overseas, can create strong interest for an asset and garner a price that exceeds expectations.
- Articulate a compelling value and growth story for each buyer: Buyers are more circumspect than ever about the growth potential of businesses being offered for sale. However, few sellers articulate a strong value and growth story from the perspective of the most likely buyers. Only 50% of respondents support their story with independent review or diligence, develop an M&A plan for the asset, or identify upsides and synergy cases.
- Prepare rigorously for the divestment process: Half of respondents admit that certain changes to the preparation process could have made a material difference. Examples include protocols for information sharing and confidentiality, engagement with target management and investment by senior team members.
- Understand the importance of separation planning: More than half of respondents identified a clear separation roadmap as the most increasingly complex aspect of divestment. Other separation challenges include negotiating transition services agreements (TSAs), estimating standalone costs, tax planning and decisions regarding the completion mechanism. When sellers don't clearly communicate these factors, buyers perceive greater risk and they reflect that perception in their offering price.
| High performers are more likely to engage in key activitiesthan low performers ... | ||
| Key activities | High performers | Low performers |
| Conduct structured and regular portfolio analysis | 55% | 34% |
| Effectively prepare key financial information | 55% | 41% |
| Provide early assessment of potential buyer synergies | 51% | 38% |
| Effectively engage with target management team | 65% | 34% |
| Develop separation/transition roadmap | 55% | 35% |
| ... and they derive more satisfaction from the divestment process | ||
| Overall satisfaction with: | High performers | Low performers |
| Effectiveness and efficiency of process | 100% | 29% |
| Impact on earnings per share | 85% | 56% |
| Separation execution | 94% | 29% |
| Communication with internal stakeholders | 78% | 65% |
| Management of buyer due diligence | 69% | 58% |
