The study found that 58% of SEA companies reinvested proceeds from their last divestment into new products, market and geographies. This strategy helps companies to better respond to cross-sector opportunities and can create longer-term value for shareholders and the company.
Convergence across industry has changed the competitive landscape for some companies in previously well-defined industries. Hence, their challenge now is to find new ways to innovate for the next generation consumer, and drive competitive advantage and shareholder value. Companies that show focus through a well-defined strategy are being rewarded, which drives the need for portfolio rationalization and divestment of non-core assets.
Another key trend that SEA companies are seeing is industry consolidation with companies pursuing inorganic growth strategies for a higher market share. In 2019, 78% of SEA respondents are expecting divestments to drive industry consolidation, up from 54% last year.
How to maximize value for future divestments
The survey highlighted that having a strong value story, backed by early preparation that will address the questions of a broader buyer pool, is more important than ever. Seventy percent of SEA sellers say the price gap between buyers and sellers is greater than 20%, up from 26% a year ago.
Over the past year, sellers are also facing an increased gap in what they think their business is worth and what buyers are willing to spend. Over 70% of Asia-Pacific respondents reported a gap of more than 20% between sellers’ expectations and buyers’ offers, up a significant 41 percentage points from 2018.