How can banks better prepare their divestments?
With execution and active marketing of large assets still mostly on hold, the focus has turned to reviewing portfolios and, according to 49% of banks, continuing their divestment preparation.
Dedicating adequate time and resources to this process is important. Unfortunately, it is often overlooked; close to two-thirds (64%) admit they significantly underestimate the internal resources and time needed to prepare an asset for sale.
What’s more, 66% agree that they should have invested more time and resources into creating pre-sale value on their most recent divestment.
In a market where the price gap between sellers and buyers is already wide, the importance for sellers of preparing their divestments in the right way to achieve the highest possible price should not be underestimated. Indeed, sellers will most likely need to face the reality that they are unlikely to achieve pre-COVID pricing in the near term. Recognition and acceptance of the new pricing dynamics could, therefore, be critical for divestment activity to increase.
For some banks, preparation will include pursuing value creation or restructuring initiatives to make the business for sale more attractive to potential buyers.
Value creation strategies vary but the top two areas where banks are now placing greater focus before putting the business up for sale are: confirming the quality of the management team in the business (49%); and optimizing the asset’s legal structure (41%), which could mean separating it partially or fully.
Of various restructuring approaches being considered in the middle or back office, most (54%) say they may carve out capabilities (employees, assets, infrastructure) and transfer them to a managed service provider; and collaborate with industry or market peers to form a shared capability or utility.