The FINANCIAL — A third (33%) of global businesses are planning a sale in the next two years according to a new report from EY, a global leader in assurance, tax, transaction and advisory services.
The annual 2014 Global Corporate Divestment Survey, which surveyed more than 700 corporate executives globally, also reveals that 80% of global executives are open to offers for prized assets and a 30% premium would bring a majority of execs to the deal table.
In terms of options, 55% of global executives would consider a full sale of their business compared to 34% who would opt for a carve out and 14% an IPO, according to EY.
With 80% of executives open to offers even for prized assets, a 30% premium on a ‘fair’ price will bring half to the deal table. Higher prices will be needed to lure the trophy from the cabinet for others and contrary to the old adage, not everyone ‘has a price’ – 20% of executives say they would not sell a valued asset for any premium.
As with all aspects of M&A, different factors drive divestment activity across industries. Life Sciences should be the most active divesting sector, with 41% expecting to sell in the next two years – the main reason being regulatory change. The key driver for divestments in Consumer Products is off-trend product (58%), followed by 44% who said reduced demand or market share would make them consider divesting, according to EY.
In the fast moving Tech sector, half of executives said the biggest trend prompting them to consider divestments is big data and analytics developments, followed by cloud innovations and mobile as companies re-evaluate their core business and competitive positions.
More than half of respondents have divested an asset in the past two years. The vast majority of those (80%) that pursued a strategic rather than opportunistic approach to a sale saw a positive impact on their valuation as a result – half of those experienced greater benefits than anticipated, compared to only a fifth of companies 12 months ago.
However, even though a third plan a divestment, further opportunities to fully optimize value remain. Half the respondents don’t conduct regular portfolio reviews to assess new growth opportunities. Only 41% undertook a strategic portfolio review to drive their last divestment; 52% said their executive board was involved in setting portfolio review goals, according to EY.
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