-: Divestitures continue to be an important tool
to raise cash and optimize corporate portfolios.
When we at BCG look at M&A deals,
we always look at it from a value creation angle.
Do these transactions create value for shareholders?
To explore that, we leverage BCG's unique M&A database
of more than 800,000 transactions covering the period
of 31 years since 1980.
The message from our 2021 report is very clear:
Periodic portfolio adjustments and divestitures of noncore
assets can create substantial value for shareholders.
To measure that, we use two indicators:
One is the short-term announcement return, around the
immediate day of the transaction.
And the other one is the long-term total shareholder return
relative to peers, which measures the value creation in the
two years after the transactions.
And both are up on average since 2016.
Announcement returns for divestitures
have more than tripled since the pandemic,
coming from 0.2% in 2016,
to 0.7% in the first half-year of 2021.
And that's a highly statistically irrelevant number.
Positive announcement returns indicate that
currently, investors are supportive of divestitures.
Our analysis also shows that the value creation effect of
disposing assets is even stronger when
A- it's a noncore asset or
B- the asset is underperforming and
diluting the group's margin on average.
But sellers do not only get rewarded by short-term returns.
The same trend can be observed in the
two year RTSR afterwards,
which increased from approximately 1.5% for deals announced
in 2014, to now over 4% for those announced in 2019.