To close that valuation gap, advanced manufacturing companies need to focus on the whole buyer pool, including corporates and private equity acquirers.
- For corporate acquirers, building the strongest possible case on synergies is essential, particularly where it is possible to articulate clearly how a buyer will achieve those gains. Right now, however, only 34% of advanced manufacturing companies say they presented the synergy opportunity to each likely buyer.
- For private equity buyers, preparing a stand-alone operating model is essential to keeping them in a sales process. With record amounts of dry powder (US$703b globally) and favorable deal conditions, keeping PE engaged in the process can be vital to a successful deal. Thirty-seven percent said involving PE in their divestiture led to an increase in purchase price.
Use data to tell the story
Data and analytics tools increasingly offer a way to secure greater value from divestment strategy, but too few advanced manufacturing companies are exploiting the full potential of these technologies.
- 70% of businesses use such tools to make divestment decisions in the first place.
- Only 39% do so during negotiations with buyers.
- Only 61% say they provided potential buyers with access to their data and the outputs of their advanced analytics in their latest divestment, but this was considered the initiative that created the most value.
Leveraging these tools to build a stronger case for potential buyers — and even to help buyers build a case themselves — may be a powerful value driver. The key is to identify supportable insight that makes a persuasive argument to the buy side. This will require high-quality data management that generates consistent and accurate outputs.
Advanced manufacturing businesses expect divestment activity to remain elevated over the next 12 months but 57% concede that shortcomings in their portfolio and strategic review process have sometimes resulted in a failure to achieve their expected divestment results.
Later in the deal, it is clear a lack of forward planning too often threatens to erode value, from failing to plan for workstream interdependencies to limited use of data and analytics.
Some of these issues are specific to the advanced manufacturing sector. For example, many companies now need to think of their divestment strategy in the context of the way in which technology is changing their business models. Others are failings that are common across many sectors.
Those advanced manufacturing companies that move fastest to remedy these shortcomings will reshape their portfolios more quickly and effectively — and generate more value than their rivals. As technology transforms their marketplace, these businesses will have a distinct edge.