Top considerations in divestment strategy:
- Have a clear view on strategic alignment, competitive advantage and potential for long-term value creation for each business
- Consider pursuing divestments to help accelerate investments in technology, new products and geographies and fuel new growth for RemainCo
- Communicate effectively with stakeholders the need to divest a business that is not a strategic fit, even though it might be a strong performer
Leverage portfolio reviews to drive strategic divestment decisions
Indian companies understand the importance of divesting the right asset at the right time. The EY survey highlights that 70% of executives say they held onto assets too long when they should have divested them. Acting in a timely manner to divest can increase sale value and shareholder returns.
In order to take full advantage of a divestment, it is important to have a rigorous portfolio management process in place. There is a need to define KPIs and how to identify non-core and nonperforming assets. In line with this, 86% of the CEOs acknowledged that they can provide better guidance on what’s core vs. non-core in relation to the company’s strategy to identify the right divestment candidate at the right time.
Through greater portfolio agility and a strong divestment strategy, companies can capture strategic benefits for the long term. In effectuating a divestment, 53% of executives say they were able to redefine their growth strategy focused on core businesses.