-: Breaking up is never easy.
The corporate divestiture is a long-term decision,
and making informed choices is the key
to a mutually beneficial outcome
that creates true value.
To assess what makes a divestiture successful,
we analyzed more than 840,000 deals from the past 30 years.
And the message from our 2021 M&A report is clear:
Sellers can get to the good side of the performance gulf
by carefully preparing for every divestiture
from start to finish.
If organizations select the right moment,
the right asset, and the right channel to sell,
they can capture substantial value.
Following a rocky ride in 2020,
the mergers and acquisitions market
has been booming in 2021.
By midyear, deal values returned to the high levels
seen before the pandemic.
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Reopening economies, government assistance,
and high levels of available cash
have combined with other factors
to create a strong demand for assets.
But the favorable market conditions
we're currently experiencing are not the only aspect
of timing to consider.
A company's individual situation will also determine
the outcome of a divestiture.
For example, shareholder returns tend to be higher
in a strong economy environment.
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Selling noncore or underperforming assets
generates higher shareholder returns.
It frees up cash, reduces complexity,
and improves growth and margins.
Among the different ways to divest,
spin-offs, in which a corporate owner issues separate shares
to existing shareholders, generate the highest returns.
Trade sales, where companies are sold in private deals,
outperform IPOs,
especially when choosing corporate buyers over investors.
In all cases, preparation is a vital aspect
of any successful divestiture.
Separating the asset operationally and financially
from the company for a smooth day one
will minimize disruption,
both for the divested business and the parent company.
But preparation also involves a team effort
with high attention to detail.
From putting the right people on the project
to tracking the budget and communicating appropriately,
every aspect needs to be carefully managed and executed.
This will directly impact transaction value,
market perception, and postclose performance.
Find out more on the stakes and challenges
of today's M&A market.