WEBVTT 1 00:00:01.060 --> 00:00:03.023 Breaking up is never easy. 2 00:00:04.060 --> 00:00:07.670 The corporate divestiture is a long-term decision, 3 00:00:07.670 --> 00:00:10.410 and making informed choices is the key 4 00:00:10.410 --> 00:00:12.330 to a mutually beneficial outcome 5 00:00:12.330 --> 00:00:14.490 that creates true value. 6 00:00:14.490 --> 00:00:17.290 To assess what makes a divestiture successful, 7 00:00:17.290 --> 00:00:22.290 we analyzed more than 840,000 deals from the past 30 years. 8 00:00:22.410 --> 00:00:26.600 And the message from our 2021 M&A report is clear: 9 00:00:26.600 --> 00:00:29.630 Sellers can get to the good side of the performance gulf 10 00:00:29.630 --> 00:00:32.390 by carefully preparing for every divestiture 11 00:00:32.390 --> 00:00:34.029 from start to finish. 12 00:00:34.029 --> 00:00:37.210 If organizations select the right moment, 13 00:00:37.210 --> 00:00:40.000 the right asset, and the right channel to sell, 14 00:00:40.000 --> 00:00:42.670 they can capture substantial value. 15 00:00:42.670 --> 00:00:45.210 Following a rocky ride in 2020, 16 00:00:45.210 --> 00:00:47.120 the mergers and acquisitions market 17 00:00:47.120 --> 00:00:49.930 has been booming in 2021. 18 00:00:49.930 --> 00:00:53.210 By midyear, deal values returned to the high levels 19 00:00:53.210 --> 00:00:55.173 seen before the pandemic. 20 00:00:55.173 --> 00:00:58.256 (light upbeat music) 21 00:01:04.220 --> 00:01:06.860 Reopening economies, government assistance, 22 00:01:06.860 --> 00:01:09.010 and high levels of available cash 23 00:01:09.010 --> 00:01:10.990 have combined with other factors 24 00:01:10.990 --> 00:01:13.805 to create a strong demand for assets. 25 00:01:13.805 --> 00:01:16.110 But the favorable market conditions 26 00:01:16.110 --> 00:01:19.030 we're currently experiencing are not the only aspect 27 00:01:19.030 --> 00:01:21.070 of timing to consider. 28 00:01:21.070 --> 00:01:24.070 A company's individual situation will also determine 29 00:01:24.070 --> 00:01:25.950 the outcome of a divestiture. 30 00:01:25.950 --> 00:01:29.230 For example, shareholder returns tend to be higher 31 00:01:29.230 --> 00:01:31.537 in a strong economy environment. 32 00:01:31.537 --> 00:01:35.430 (light upbeat music) 33 00:01:35.430 --> 00:01:38.520 Selling noncore or underperforming assets 34 00:01:38.520 --> 00:01:40.900 generates higher shareholder returns. 35 00:01:40.900 --> 00:01:43.837 It frees up cash, reduces complexity, 36 00:01:43.837 --> 00:01:47.210 and improves growth and margins. 37 00:01:47.210 --> 00:01:49.390 Among the different ways to divest, 38 00:01:49.390 --> 00:01:52.680 spin-offs, in which a corporate owner issues separate shares 39 00:01:52.680 --> 00:01:57.240 to existing shareholders, generate the highest returns. 40 00:01:57.240 --> 00:02:00.740 Trade sales, where companies are sold in private deals, 41 00:02:00.740 --> 00:02:02.730 outperform IPOs, 42 00:02:02.730 --> 00:02:06.500 especially when choosing corporate buyers over investors. 43 00:02:06.500 --> 00:02:09.580 In all cases, preparation is a vital aspect 44 00:02:09.580 --> 00:02:11.840 of any successful divestiture. 45 00:02:11.840 --> 00:02:14.850 Separating the asset operationally and financially 46 00:02:14.850 --> 00:02:17.420 from the company for a smooth day one 47 00:02:17.420 --> 00:02:19.310 will minimize disruption, 48 00:02:19.310 --> 00:02:22.985 both for the divested business and the parent company. 49 00:02:22.985 --> 00:02:26.490 But preparation also involves a team effort 50 00:02:26.490 --> 00:02:28.690 with high attention to detail. 51 00:02:28.690 --> 00:02:30.720 From putting the right people on the project 52 00:02:30.720 --> 00:02:34.140 to tracking the budget and communicating appropriately, 53 00:02:34.140 --> 00:02:38.340 every aspect needs to be carefully managed and executed. 54 00:02:38.340 --> 00:02:41.110 This will directly impact transaction value, 55 00:02:41.110 --> 00:02:44.173 market perception, and postclose performance. 56 00:02:45.230 --> 00:02:47.540 Find out more on the stakes and challenges 57 00:02:47.540 --> 00:02:49.463 of today's M&A market.