How to prepare for divestment success
Timing is vital when it comes to getting the right price — yet nearly two-thirds (63%) of companies say they held onto assets for too long, up from 56% in 2018. By contrast, sellers who say they did not hold onto assets too long were twice as likely to secure a better price from the transaction.
To help improve this, sellers are focusing on making their businesses divestment-ready, with 32% saying that optimizing the legal structure was the most important factor in enhancing value in their last divestment. However, 57% state that lack of flexibility in the sale structure eroded deal value.
Greater flexibility in deal structure gives businesses room to optimize according to market conditions, tax efficiencies, timeline, anti-trust considerations and net proceeds target. Similarly, sellers must address regulatory obstacles such as business licenses and labor requirements at an early stage of the divestment process to reduce delays and transition cost overruns.
Businesses that fail to consider tax considerations also risk value erosion — two-thirds of those surveyed say lack of preparation in dealing with tax risk eroded value in their last divestment. To minimize tax exposure on the deal, companies must also consider country-by-country requirements. Forty-five percent of companies say they expect increased tax challenges in their future divestment process.
- Always be “divestment-ready.” A well-defined portfolio strategy, coupled with the right resources and expertise, can provide confidence in the ability to act when the time is right.
- Make tax a top consideration. Tax complexity can add time and erode value if not sufficiently addressed early in the sale process.