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2015 | ey.com/divest
Global
Corporate
Divestment Study
Closing the deal: strategies
to increase speed and value
1
A note from Paul Hammes,
EY Global Divestiture Advisory Services Leader
Leading companies view divestments as a fundamental part of their capital strategy, especially to fund
growth. More than half of the companies surveyed for our latest EY Global Corporate Divestment Study
expect the number of strategic sellers to increase in the next 12 months.
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A note from Steve Krouskos,
EY Global Deputy Vice Chair, Transaction Advisory Services
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at the center of a company's growth strategy. Why is this? Because divestments are vital to portfolio
optimization — they are at the heart of funding future business growth. Letting go is how a company grows.
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Companies often struggle to get the right information to make good portfolio decisions and
to balance speed with value when selling assets. Here are the highlights of our 2015 Global
Corporate Divestment Study:
Why you should consider divesting
74%
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divestments to
fund growth
66%
saw an increased
valuation multiple in the
remaining business after
their last divestment
How you can increase shareholder value
55%
say they need better
analytics tools to improve
portfolio reviews
Companies can learn
value creation
lessons from
private equity
How to increase speed and certainty
Preparation shortcuts
elongate diligence and
delay time to close
50%
of executives completed
their deal on time by starting
preparations earlier
3
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Three success
criteria met
19%
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One success
criteria met
No success
criteria met
19%
of sellers are high performers who meet
three key success criteria
4
34%
Two success
criteria met
34%
13%
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Which triggers prompted your most recent divestment?
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12%
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57%
46%
16%
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45%
16%
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9%
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43%
7%
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40%
15%
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39%
8%
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34%
2%
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29%
14%
Consideration
How did you use the funds raised from your most
recent divestment?
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74% used
divestments
to drive growth
12%
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34%
14%
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45% of executives say
shareholder activism
afÖm]f[]\l`]aj
decision to divest
Most important
5
“More investments in analytical tools to model portfolio decisions
would lead us in the right direction and help us capitalize on
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could shift our focus and switch back as needed.”
Executive at a Germany-based automotive company
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What do you expect to see in the divestment market
over the next 12 months?
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9%
37%
54%
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22%
36%
42%
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22%
32%
Decrease
46%
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6
50%
of executives say that closing deals quickly
and with certainty is more important than
waiting longer to secure a higher price.
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What would make your portfolio review
process more effective?
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58%
14%
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56%
13%
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Understand business unit cost allocations
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8%
39%
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25%
11%
Consideration
Most important
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Use the right industry benchmarks
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7
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kljm[lmj]afZmkaf]kk<$o`Ylogmd\l`Yldggcdac]Y[jgkk
Ydd[gehYfq^mf[lagfkgn]jl`]f]pll`j]]lgÕn]q]Yjk7
• Run regression models based on sales-to-investment.
Mf\]jklYf\`goqgmjZmkaf]kkmfalkj]khgf\lg[`Yf_]k
afhja[af_$Y\n]jlakaf_$hjgeglagf$affgnYlagfYf\
gl`]j^Y[lgjkkgqgmcfgoo`]j]lg^g[mk[YhalYd&
• 9fYdqr]fgf%ÔfYf[aYde]lja[k&;gehYfa]kemklmk]Za_
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]pYehd]$kg[aYde]\aYkgmj[]keYqj]n]Ydl`Ylhjg\m[lkYj]
Z]af_j][]an]\\a^^]j]fldqafl`]eYjc]ll`YfYfla[ahYl]\&
L`]k]lggdkYj]]^^][lan]fglgfdq^gjhgjl^gdageYfY_]e]fl
ZmlYdkg^gj[j]Ylaf_Ykljgf_$kmhhgjlYZd]nYdm]klgjql`Yl
]f`Yf[]kkYd]hja[]Yf\]ph]\al]k\ada_]f[]&
55%
of executives say business analytics would
make their portfolio reviews more effective
8
How big data can help you make portfolio
decisions and prepare for a divestment
:a_\YlYak[geegfdq\]Õf]\afl]jekg^^gmjNÌkÈ
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Y`m_]nYja]lqg^kljm[lmj]\Yf\mfkljm[lmj]\^gjek&AfY
\an]kle]fl$qgm[Yfmk]Za_\YlYlg2
• 9hhdqhj]\a[lan]YfYdqla[kYf\^gj][Yklaf_lgimYfla^q
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• Mf\]jklYf\c]qZmkaf]kk[q[d]kZqmladaraf_
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• =ehdgqY\][akagf%eYcaf_^jYe]ogjc
ZYk]\gf\YlYk[a]f[]lgj]Y[`YfgZb][lan]
na]og^YkljYl]_a[hgjl^gdag
• A\]fla^qhgl]flaYdkqf]j_a]kYf\\ak%kqf]j_a]k
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;gf\m[laf_hgjl^gdagj]na]okloa[]Yq]Yjaka\]Yd&
J]_mdYjj]na]okaehjgn]afl]jfYd\qfYea[kaflogc]qoYqk&
>ajkl$l`]qZ]ll]jhj]hYj]l`]E9l]Yelgaehd]e]fl
ZgYj\'kljYl]_ql]Ye\][akagfk&>gj]pYehd]$a^YZmkaf]kkak
hmlgfYoYl[`dakl$l`]E9l]Ye[Yf`Yn]egj]d]Y\lae]
lghj]hYj]l`]Zmkaf]kk^gjkYd]2*-g^]p][mlan]kkYql`Yl
Z]ll]j[geemfa[YlagfZ]lo]]fl`]ZgYj\'kljYl]_qYf\E9
l]Yeogmd\aehjgn]hgjl^gdagj]na]o]^^][lan]f]kk&
K][gf\$^j]im]flhgjl^gdagj]na]okYj]na]o]\Zq]ehdgq]]k
Yf\k`Yj]`gd\]jkYkYfgZb][lan]]p]j[ak]lg[j]Yl]
klYc]`gd\]jnYdm]&:q[gfljYkl$af^j]im]flj]na]ok[Yf
]Y[`Z]k]]fYkYka_fg^Yhgl]flaYd\an]kle]fl$d]Y\af_
lgjmegjk$mf[]jlYaflq$j]\m[]\]ehdgq]]egjYd]Yf\
o]Yc]jkmhhda]jgj[mklge]jj]dYlagfk`ahk&L`]eYbgjalqg^
]p][mlan]kY[cfgod]\_]l`]f]]\^gjegj]^j]im]flj]na]ok$
o`ad]+1kYql`Yl_j]Yl]j[gfÕ\]flaYdalqg^Õf\af_k$lgg$
ogmd\eYc]j]na]okegj]]^^][lan]&
25%
say that better communication between
the board/strategy and M&A team would
improve portfolio review effectiveness.
39%
kYql`Yl_j]Yl]j[gfÕ\]flaYdalqg^Õf\af_k
would make reviews more effective.
“Frequent portfolio reviews help us assess every business
unit at equal intervals and on set targets. This makes
management more aware about the business’s actual
hjgÕlYZadalq$Yf\f][]kkYjq[`Yf_]k[YfZ]eY\]ja_`lYoYq&Ê
Executive at a US-based consumer products company
9
O`YlnYdm][j]Ylagfd]kkgfk[Yf
qgmd]Yjf^jgehjanYl]]imalq7
HjanYl]]imalq H=![gflafm]klggmlh]j^gje[gehYjYZd]hmZda[[gehYfa]ko`]fal[ge]klg
[j]Ylaf_nYdm]$Y[[gj\af_lg=QÌkegklj][]flHjanYl]=imalqNYdm];j]YlagfKlm\q&Fglgfdq\a\
MKH=hgjl^gdag[gehYfa]kY[`a]n]]imalqj]lmjfk,&,pl`gk]g^kaeadYjhmZda[dqdakl]\[gehYfa]k
^gjl`]kYehd][gehd]l]\Z]lo]]f*((.Yf\*()+$ZmlH=ÌkkljYl]_a[Yf\gh]jYlagfYd
aehjgn]e]flk`Yn]Z]]fYc]qh]j^gjeYf[]\jan]j&
Sources of annual EBITDA growth
in the US, 2006–131
0.8%
kYd]$[gehYfa]kk`gmd\j]YhhjYak]l`gk]_ma\]daf]klg
\]l]jeaf]a^Y\\alagfYd^g[mk[gmd\lgd]Y\lgaf[j]Yk]\
kYd]nYdm]&
0.2%
4.7%
4.6%
Organic revenue growth
Cost reduction
8.6%
Bolt-on acquisitions
18.9%
Disposals
Other
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[gfkljYaflkg^H=È\]h]f\af_gf`gol`]qeYfY_]l`]aj
hgjl^gdagkÈl`]q[Yfkladdd]YjfnYdm][j]Ylagfd]kkgfk^jgeH=&
9f\alÌkogjl`fglaf_l`Yll`]k]d]kkgfk[Yf`]dh[j]Yl]nYdm]
afYZmkaf]kkmfalo`]l`]jgjfglalakZ]af_hj]hYj]\^gjkYd]&
KlYjl]YjdqlgZmad\
kmklYafYZd]_jgol`
H=cfgokl`YlZmq]jk]p`Ymklan]dqk[jmlafar]afn]kle]fl
ghhgjlmfala]k&Kgk`gjl%l]jej]n]fm]afÖYlagfYf\[gkl
[mllaf_\gfglhYkkl`akl]kl&JYl`]j$H=^g[mk]kgfdgf_%l]je
kmklYafYZd]_jgol`&H=Õjekg^l]fhdYf^gj$Yf\]p][ml]gf$
gh]jYlagfYdaehjgn]e]flkq]YjkafY\nYf[]g^Yf]pallg
[j]Yl]kmklYafYZd]h]j^gjeYf[]Yf\ege]flmel`Yle]jal
`a_`]jnYdmYlagfk&
If you have 12-24 months before
you prepare for a sale, focus on:
Treating the business as a standalone entity.;gehYfa]k
lqha[YddqYhhdqYfmeZ]jg^c]qh]j^gjeYf[]af\a[Ylgjklg
Zmkaf]kkmfalko`]fl`]q\][a\]o`]l`]jgjfgllgeYc]
afn]kle]flk ]&_&$eYj_afl`j]k`gd\kgjj]lmjfk$hYqZY[cgf
[YhalYdafn]kle]fl!&O`]fYZmkaf]kk`YkZ]]f]YjeYjc]\^gj
10
Enhancing revenue.L`]dYl]kl=QHjanYl]=imalqNYdm]
;j]YlagfKlm\qj]n]Ydkl`Ylf]Yjdq`Yd^g^nYdm]gn]jl`]da^]
g^Yfafn]kle]flak[j]Yl]\l`jgm_`j]n]fm]]f`Yf[]e]fl&
Af[dm\af_l`]gl`]j`Yd^$o`a[`akZjgc]f\gofZ]lo]]f
afgj_Yfa[_jgol`Yf\[gklkYnaf_k$l`]k]nYdm][j]Ylagf
afalaYlan]k`Yn]j]kmdl]\afYfYffmYd=:AL<9af[j]Yk]g^
f]Yjdq)1&
O`ad]Yf]pl]fkan]hjg\m[l]phYfkagfhjg_jYe[gmd\Z]
mfj]Ydakla[^gjYZmkaf]kkl`Yl`YkZ]]f]YjeYjc]\^gjkYd]$
[gehYfa]k[YfklYjllgghlaear]l`]ajhjg\m[l^gglhjaflY[jgkk
[mklge]jkYf\_]g_jYh`a]k&9Zgd\]jegn][gmd\Z]lgY\\
hjg\m[lkgj]phYf\aflg\a^^]j]fl_]g_jYh`a]kgjeYjc]lk
l`jgm_`Ybgafln]flmj] BN!YjjYf_]e]fl&O`ad]alakaehgjlYfl
lg`Yn]YBN]palkljYl]_q$YBN[Yfhjgna\]Y[j]Ylan]kgdmlagf
Yf\Yhgl]flaYde][`YfakeZqo`a[`qgm[Yfaf[j]Yk]hja[]k
gfj]dYl]\hjg\m[lk&K]dd]jk[gmd\Ydkg[gfka\]jY[imajaf_Yf\
afl]_jYlaf_Yfgl`]j[gehYfq&
Principal drivers of organic revenue growth
in the US, 2007–131
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afeYjc]l\]eYf\
?]g_jYh`a[Yd
]phYfkagf
21%
Price
increases
23%
6%
13%
;`Yf_]g^
g^^]jaf_
22%
15%
Aehjgn]\
k]ddaf_
New
hjg\m[lk
1
Source: EY Private Equity Value Study, 2014
Few executives extracted
working capital, but most said
l`]qogmd\`Yn]Z]f]Õl]\
from doing so
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logkl]hko]j]mf\]jlYc]f]imYddqg^l]fYf\[al]\Zq,(g^
l`gk]o`gmf\]jlggcl`]eYkl`]ajegklaehgjlYflafalaYlan]&
?an]fH=Ìkkm[[]kkaf[j]Ylaf_kmklYafYZd]nYdm]Zq^g[mkaf_
gfj]n]fm]$h]j`Yhkegj][gjhgjYl]kf]]\lgk`a^ll`]aj^g[mk
lgoYj\l`]lghdaf]&
Extracting working capital. ;gehYfa]kg^l]ff]_d][l
l`akaehgjlYflnYdm][j]Ylagfd]n]jÈgfdq+- l`]dgo]kl
h]j[]flY_]!g^]p][mlan]k\a\al&@go]n]j$]pljY[laf_
ogjcaf_[YhalYdoYkk]d][l]\egklg^l]f *)!Ykl`]kl]h
l`Yl[gehYfa]k\a\fgllYc]ZmlZ]da]n]l`]qogmd\`Yn]
Z]f]Õl]\^jgel`]egkl&@]j]alakY\nakYZd]lg^gddgol`]
d]Y\g^H=$o`a[`g^l]f]pljY[lkogjcaf_[YhalYdlgj]afn]klaf
_jgol`Yj]Yk&
L`]hjgZd]eakl`YlZmq]jk_]f]jYddqogfÌlhYq^gj]p[]kk
ogjcaf_[YhalYd&;gehYfa]khdYffaf_lg\an]klYZmkaf]kkf]]\
gfdq]fgm_`ogjcaf_[YhalYdlgjmfl`]Zmkaf]kkgfY\Yq%lg%
\YqZYkak&Egj][Yk`l`Yfl`Ylk`gmd\Z]hmllgogjchjagjlg
kYd]&>g[mkaf_gfl`akg^l]fdgo%`Yf_af_^jmaloaddYdkg[Ymk]
^]o]j\akjmhlagfkl`Yf\a^Õ[mdl[gkl%[mllaf_\][akagfkj]dYl]\lg
h]jkgff]dgjkmhhda]jk&
Cutting costs through procurement.;gehYfa]k[Yf]fl]j
aflg_jgmhhmj[`Ykaf_gj_YfarYlagfk$gj]n]f^gjel`]ajgof
Zmq]j[gfkgjlaY$lgj]\m[][gklkYf\]f`Yf[]eYj_afk&
If you have limited time — less than 12
months before you start preparing for sale:
NYdm][j]Ylagfghlagfk^gj]f`Yf[af_kYd]hja[]Yj]fYjjgo]j
afl`akk`gjllae]^jYe]Z][Ymk]l`]Zmq]joaddoYfllgcfgo
l`YlnYdm][YfZ]j]Ydar]\Yf\kmklYaf]\gn]jl`]dgf_l]je&A^
l`]k]dd]j[Yffgl^mddqaehd]e]fll`]nYdm][j]YlagfafalaYlan]k$
alk`gmd\Yld]Ykl\]n]dghY\]lYad]\jgY\eYhl`Ylaf[dm\]k
]ph][l]\afn]kle]flkYf\]p][mlagfhdYfk&
Which of the following pre-sale value creation
initiatives did you undertake?
Ghlaearaf_d]_Ydkljm[lmj] ]&_&$hmllaf_[Yjn]\%gml
Ykk]lkaflgYf]od]_Ydkljm[lmj]!
66%
20%
Ghlaear]\l`]lYpkljm[lmj]
64%
20%
Gh]jYlagfYdaehjgn]e]flklgj]\m[][gklk'aehjgn]eYj_af
40%
63%
=f`Yf[af_j]n]fm] ]&_&$hjg\m[l
aehjgn]e]flgj\akljaZmlagf]phYfkagf!
62%
40%
Gh]jYlagfYddqk]hYjYlaf_l`]Zmkaf]kkhYjlaYddqgj^mddq
57%
25%
=pljY[laf_ogjcaf_[YhalYd
29%
Undertook
35%
Most important for enhancing value
Which step did you not do but now feel you
ogmd\`Yn]Z]f]Õl]\^jgel`]egkl7
=pljY[laf_ogjcaf_[YhalYd
21%
Gh]jYlagfYdaehjgn]e]flklgj]\m[][gklk'aehjgn]eYj_af
19%
=f`Yf[af_j]n]fm] ]&_&$hjg\m[laehjgn]e]fl
gj\akljaZmlagf]phYfkagf!
19%
Ghlaearaf_l`]lYpkljm[lmj]
16%
Gh]jYlagfYddqk]hYjYlaf_l`]Zmkaf]kkhYjlaYddqgj^mddq
16%
Ghlaearaf_d]_Ydkljm[lmj] ]&_&$hmllaf_[Yjn]\%gml
Ykk]lkaflgYf]od]_Ydkljm[lmj]!
8%
11
Kge]afalaYlan]kl`YleYq`Yn]Y_j]Yl]j[`Yf[]g^Y\\af_
nYdm]j]dYlan]dqima[cdqaf[dm\]j]f]_glaYlaf_oal`n]f\gjk$
j]\m[af_\akljaZmlagfYf\K?9[gklk$]pljY[laf_ogjcaf_
[YhalYdYf\k]ddaf_g^^j]Yd]klYl]&
Fgk][j]lkYm[]
L`]H=hdYqZggc\g]kfgl`Yn]mfaim]d]n]jklghmdd&H=
^g[mk]kgfnYdm][j]YlagfZqZ]af_\ak[ahdaf]\oal`hdYffaf_$
e]Ykmjaf_$Y[[gmflYZadalqYf\j]oYj\af_Y[`a]n]e]fl&L`ak
YhhjgY[`[j]Yl]kY_j]Yl]jk]fk]g^mj_]f[qYf\eYfY_]e]fl
^g[mkgfnYdm][j]YlagfafalaYlan]k&
• Governance model. H=gof]jklYdclgeYfY_]e]fl
^j]im]fldq&Afl`][gjhgjYl]ogjd\$o]km__]klegj]
^j]im]flYf\Y[lagf%gja]fl]\e]]laf_klgaf[j]Yk]
Yll]flagfgfnYdm][j]Ylagf&;gjhgjYl]gj_YfarYlagfk
Ydkgk`gmd\eYc]gZb][lan]\][akagfkZYk]\gfjgZmkl
af^gjeYlagf$afkl]Y\g^d]llaf_afl]jfYdhgdala[kYf\
[geh]lalagf^gjj]kgmj[]kaeh]\]hjg_j]kk&
• Rewards.H=g^l]fg^^]jk]imalq%lqh]j]oYj\klg
[j]Yl]af[]flan]kl`jgm_`gmll`]nYdm][j]Ylagf
hjg[]kk&;gjhgjYl]kÌaf[]flan]hjg_jYekYj]g^l]f
dafc]\lg_jgmhh]j^gjeYf[]Yf\k`gmd\afkl]Y\dafc
\aj][ldqlgaf\ana\mYdZmkaf]kkmfalh]j^gjeYf[]&
• Management accountability.H=l]f\klgeYc]
ima[c]j\][akagfkj]_Yj\af_Y[[gmflYZadalqZ][Ymk]l`]
[geemfa[Ylagfdaf]kYj]k`gjl]j&GmjH=klm\q^gmf\l`Yl
`Ynaf_l`]ja_`leYfY_]e]fll]YeYll`]klYjlg^l`]\]Yd$
jYl`]jl`Yf_gaf_l`jgm_`eYfY_]e]fl[`Yf_]kdYl]j$ak
gf]g^l`]^Y[lgjkegklkljgf_dq[gjj]dYl]\oal`k`gjl]j`gd\
h]jag\k$`a_`]j=:AL<9_jgol`Yf\`a_`]j]imalqemdlahd]k&
L`]c]qlgnYdm][j]Ylagf^gj[gjhgjYl]kak[j]Ylaf_YhdYf]Yjdq
Yf\`gd\af_eYfY_]e]flYf\]ehdgq]]kY[[gmflYZd]&L`ak
oYq$k]dd]jk[Yfk`goYljY[cj][gj\g^km[[]kkl`YleYc]k
^mlmj]hdYfk[j]\aZd]&
PE focuses more on
value creation by being
disciplined with planning,
measuring, accountability
and rewarding achievement
“We wanted to improve investor sentiment, so earning a
high value from the divestment was important. With this
vision, we increased the value of the deal by enhancing
performance and communicating well with the buyer.”
=p][mlan]YlYf9mkljYdaY%ZYk]\ÔfYf[aYdk]jna[]k[gehYfq
12
@go[Yfqgmaehjgn]
\an]kle]fl]p][mlagf7
<an]kle]fl]p][mlagfaf[dm\]kÕn][jala[Ydogjcklj]Yek2_gn]jfYf[]$lYp$[Yjn]%gmlÕfYf[aYd
klYl]e]flk$\]Yd%ZYkakaf^gjeYlagfYf\gh]jYlagfYdk]hYjYlagf&@]j]o]^g[mkgfl`]`a_`]kl%aehY[l
Yj]Ykoal`afl`gk]ogjcklj]Yekl`YlYj][j]Ylaf_l`]egklka_faÕ[Yfl[`Ydd]f_]k^gj]p][mlan]k&
Gf]g^l`]egklaehgjlYfl[gfljaZmlgjklgeYpaearaf_Zgl`
kh]]\Yf\nYdm]aklgklYjlhj]hYjaf_gflae]2`a_`%h]j^gjeaf_
[gehYfa]ko]j]-(egj]dac]dqlg`Yn]klYjl]\hj]hYjYlagf
gflae]l`Yfdgo%h]j^gjeaf_[gehYfa]kl`YlklYjl]\l`]
hjg[]kkdYl]Yf\`Y\lglYc]k`gjl[mlk&
EYfY_]qgmjlae]daf]
>gjlq%^gmjh]j[]flg^]p][mlan]kkYql`]qk`gmd\aehjgn]`go
l`]qeYfY_]l`]aj]p][mlagflae]daf]^gjl`]ajf]pl\an]kle]fl&
Leading practices
• <]n]dghYkljgf_\an]kle]fl_gn]jfYf[]kljm[lmj]
l`Yl[Yf`]dheYfY_]hjagjala]k$afl]j\]h]f\]f[a]k$
j]kgmj[]kYf\klYc]`gd\]j]ph][lYlagfk$Yk
o]ddYk]fYZd]ima[c\][akagf%eYcaf_
• =ehgo]jYf]p][mlan]kl]]jaf_[geeall]]
Yf\^mf[lagfYdk]hYjYlagfd]Y\]jklg[j]Yl]Yf
afl]jfYdYf\]pl]jfYd[geemfa[YlagfkljYl]_q
l`Ylk]lk]ph][lYlagfk$\]Õf]kjgd]kYf\
j]khgfkaZadala]kYf\^Y[adalYl]k]p][mlagf
• EgZadar]l`]\]Ydl]YeYf\\]n]dghlggdkYf\eYl]jaYdk
lgkmhhgjlk]hYjYlagfhdYffaf_Yf\]p][mlagf
• :YdYf[]l`]f]]\^gj[gfÕ\]flaYdalqoal`l`]f]]\lg
_]ll`]ja_`lh]ghd]afngdn]\afl`]kYd]hjg[]kkY[jgkk
^mf[lagfYdYj]Yklg[gehd]l]l`]\]Yd]^Õ[a]fldq
• <]Õf]Yf\[geemfa[Yl]l`]\]Ydlae]lYZd]Yf\
c]qead]klgf]kYf\k]lmhj]_mdYjegfalgjaf_
• <]n]dghYj]Ydakla[lae]daf]lgYnga\Y[[]hlaf_Y
dgo]jhja[]ZYk]\gfYfYjZaljYjq\]Y\daf]
@a_`%h]j^gjeaf_[gehYfa]ko]j]-(egj]dac]dql`Yf
dgoh]j^gje]jklg`Yn]km[[]kk^mddqeYfY_]\l`]aj
]p][mlagflae]daf]&
Which of the following governance steps should
you improve in your next transaction?
<]Õfaf_h]jae]l]jg^l`]Zmkaf]kk^gjkYd]
5%
45%
;ggj\afYlaf_YddZmkaf]kk^mf[lagfkafngdn]\afl`]k]hYjYlagf
34%
12%
EYfY_af_l`]]p][mlagflae]daf]
12%
32%
KlYjlaf_hj]hYjYlagfgflae]
9%
Some room for improvement
31%
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Y^^][lkYddgl`]j[Yjn]%gmlogjcklj]Yek&
Leading practices
• 9__j]_Yl]ÕfYf[aYd\YlYlgY[[geeg\Yl][`Yf_]kaf
l`]h]jae]l]j ]&_&$dgY\\YlY^gjl`]]flaj]gj_YfarYlagf
gj\anakagfafYoYql`Ylhjgna\]k^gjghlagfYdalq!
• Mf\]jklYf\\a^^]j]flhY[cY_af_ghlagfkYf\`go
ghlagfYdalqeYqaehY[lfglgfdql`]Zmkaf]kk^gj
kYd] ]&_&$ljYfkalagfk]jna[]Y_j]]e]flk$kmhhdq
Y_j]]e]flk!$ZmlYdkgl`]j]eYafaf_gj_YfarYlagf
]&_&$kljYf\]\[gklkYf\aehY[lgf_g%^gjoYj\
j]n]fm]k$]Yjfaf_kYf\ogjcaf_[YhalYd!
• :]Ö]paZd]oal`j]_Yj\lgZmq]jkÌ\]kaj]kYZgml
the nature g^l`]Zmkaf]kk^gjkYd]ÈYZmq]j
eYqfgloYflYddYkh][lkg^l`]Zmkaf]kk$
^gjnYjagmkj]Ykgfk ]&_&$Yflaljmkl!
@a_`%h]j^gjeaf_[gehYfa]ko]j],,egj]dac]dql`Yf
dgoh]j^gje]jklg`Yn][d]Yjdq\]Õf]\l`]h]jae]l]jg^
l`]Zmkaf]kk^gjkYd]&
13
Ghlaear]l`]lYpkljm[lmj]
HYqYll]flagflgAL
LYpkljm[lmjaf_Yf\hdYffaf_[YfY^^][ll`]\][akagflg
\an]klgjfglYf\[YfYdkgkljgf_dqafÖm]f[]l`]^gjeg^l`]
ljYfkY[lagf&=f`Yf[af_YljYfkY[lagfÌklYpkljm[lmj]j]imaj]k
\]lYad]\cfgod]\_]g^`aklgja[lYpjakckYf\]phgkmj]kYf\
Yfmf\]jklYf\af_g^`golgeala_Yl]l`]lYp[gklkg^l`]
\an]kle]fl&K]dd]jk[YfeYc]l`]\an]kle]flhjg[]kkegj]
]^Õ[a]flYf\ka_faÕ[Yfldq]f`Yf[]\]YdnYdm]Zq[jala[Yddq
Ykk]kkaf_l`]k]lYpakkm]k&
ALk]hYjYlagfakg^l]fl`]egkl[gehd]p^mf[lagfYdYj]YYf\
f][]kkalYl]kl`]dgf_]kld]Y\lae]$Yf\j]dYl]\akkm]k[Yf
oj]Yc`Yng[gfl`]]flaj]kYd]hjg[]kk&L`]akkm]k[YfZ]
]ph]fkan]Yf\mfk]lldaf_^gjhgl]flaYdZmq]jko`goYfllglYc]
gn]jY^mddq^mf[lagfaf_Zmkaf]kk&KlYjlaf_]Yjdq[Yfhjgna\]Y
em[`[d]Yj]jna]og^l`]c]q\][akagfhgaflkYf\]fYZd]l`]
k]dd]jlgeafaear]\akjmhlagf$j]\m[][gehd]palqYf\[gkl$
eafaear]l`]lae]Z]lo]]fka_fYf\[dgk]Yf\j]\m[]l`]k[gh]
g^ljYfkalagfk]jna[]kY_j]]e]flk LK9k!&@Yd^g^]p][mlan]k
kYql`]qk`gmd\aehjgn]gf\]l]jeafaf_l`]ajALk]hYjYlagf
j]imaj]e]flk$Yf\egklkYql`akgh]jYlagfYdYj]Yf]]\kl`]
egklka_faÕ[Yflaehjgn]e]fl&
Leading practices
• ImYfla^qlYpYlljaZml]k ]&_&$dgkkYf\[j]\al[Yjjq%
^gjoYj\k!Yf\hjgna\]\g[me]flYlagfkmhhgjlaf_
l`]nYdm]g^lYpYlljaZml]klgl`]Zmq]j
• 9fla[ahYl]ljYfkalagfYdk]jna[]f]]\kYf\hgl]flaYd
_dgZYdlYpkqf]j_a]k$l`]j]Zq]f`Yf[af_l`]nYdm]
g^l`][Yjn]%gmlZmkaf]kklghjgkh][lan]Zmq]jk
• J]kgdn]gh]flYp[gfljgn]jka]khjagjlg
[dgkaf_lgaf[j]Yk]]^Õ[a]f[q\mjaf_lYp
\m]\ada_]f[]Yf\hj]k]jn]\]YdnYdm]
• <]n]dghYf]^Õ[a]flljYfkY[lagfkljm[lmj]lg
eYpaear]_dgZYdY^l]j%lYpkYd]khjg[]]\k
• 9fla[ahYl][`Yf_]kafl`]^mlmj]]^^][lan]lYp
jYl]j]kmdlaf_^jgekljm[lmj][`Yf_]k ]&_&$dgkk
g^[geeakkagfYaj]gj]flj]hj]f]mjkljm[lmj]k!$
Yf\[gfka\]jlYphdYffaf_kljYl]_a]klgeala_Yl]
64%
20%
16%
14
Leading practices
• =klYZdak`Y[jgkk%^mf[lagfYdALl]Yelgk[gh]$
hdYfYf\h]j^gjel`]dg_a[YdALk]hYjYlagf
• 9da_fl`]<YqGf]ALgh]jYlaf_eg\]doal`klYf\Ydgf]
gh]jYlaf_eg\]dkljYl]_a]k af[dm\af_o`]l`]jl`]AL
[gkl^gjl`]k]hYjYlaf_Zmkaf]kk[YfZ]j]\m[]\!
• A\]fla^qghhgjlmfala]klgj]\m[][gklk^gj<YqGf]Yf\
\]n]dghYfgjeYdar]\]Yjfaf_khj]k]flYlagfY[[gj\af_dq
• J]na]ok`Yj]\kg^loYj]da[]fk]gjALk]jna[]
Y_j]]e]flk$Yf\\]l]jeaf]l`]ÕfYf[aYdYf\
k]jna[]%d]n]daehY[lYf\LK9\mjYlagfdaealYlagfk
• HdYf`golgeala_Yl]hgl]flaYdjakckYkkg[aYl]\
oal`\YlYafl]_jalqYf\Yhhda[YlagfYnYadYZadalq
optimized the tax
structure pre-sale
said it was the most
important initiative for
adding value
didn’t do it but said they
ogmd\`Yn]Z]f]Õl]\egkl
from having done so
50%
of executives say they should improve on
determining their IT separation
requirements
“Extracting business units from the main operating unit
was challenging, and we failed to adequately address the IT
separation requirements. This impacted the sale price and
also meant that expenditure on the divestment went up.”
Executive at a US-based industrials company
L]ddl`]nYdm]klgjq
K]dd]jkemklYfYdqr]l`]ajZmkaf]kk^jgeYZmq]jÌkh]jkh][lan]&AfhYjla[mdYj$hjgna\af_lYadgj]\af^gjeYlagfj]_Yj\af_hgl]flaYd
Zmq]jkqf]j_a]k$gf]%lae][gkl]klaeYl]kYf\YnYdm][j]YlagfjgY\eYhYj]l`]egkl]^^][lan]afaf[j]Ykaf_l`]Ykk]lÌk
YlljY[lan]f]kkYf\aehjgnaf_ljYfkY[lagfkh]]\&
Leading practices
• Present the synergy opportunity for each potential
bidder.>gj]pYehd]$k]dd]jkf]]\lglYadgj[geemfa[Ylagfk
\a^^]j]fldqlg[gjhgjYl]n]jkmkhjanYl]]imalqZmq]jk&
L`akkl]hak[al]\Zql`]dYj_]klh]j[]flY_]g^]p][mlan]k
+1!Ykl`]egklaehgjlYflgf]af]f`Yf[af_nYdm]&
K]n]flq%l`j]]h]j[]flg^[gehYfa]kl`Ylhj]k]fl]\
kqf]j_qghhgjlmfala]k]p[]]\]\l`]ajnYdm]]ph][lYlagfk$
Yf\/,]p[]]\]\l`]ajlaeaf_]ph][lYlagfk&
• Provide an estimate of one-time costs. Gfdq--
lggcl`akkl]h&@Yd^g^l`gk]o`g\a\fÌlkYql`]q
ogmd\`Yn]Z]f]Õl]\egkl^jge`Ynaf_\gf]kg&
L`akakaehgjlYfl$Z][Ymk]alklj]f_l`]fkYk]dd]jÌk
f]_glaYlaf_hgo]jo`]fal[Yf\]egfkljYl]l`Ylal
`Yk[gfka\]j]\l`]Zmkaf]kkÌk[mjj]flkljm[lmj]Yf\
l`][gklk]kk]flaYdlg\]dan]jaf_o`Ylakf]]\]\lgY
Zmq]j&>mjl`]jegj]$Zmq]jkoYfllgZ][d]Yj]pY[ldq
`gol`][gklk`Yn]Z]]f[Yd[mdYl]\$]kh][aYddqa^l`]q
Yj]Z]af_Ykc]\lghjgna\]hYjlg^l`]^mf\af_&
Which of the following buyer communication
initiatives did you undertake?
Hj]k]fl]\l`]kqf]j_qghhgjlmfalq^gj]Y[`dac]dqZmq]j
71%
39%
Hj]hYj]\Ym\al]\ÕfYf[aYdklYl]e]flk^gjl`]\an]kl]\Zmkaf]kk
62%
18%
<]n]dgh]\nYdm][j]YlagfjgY\eYh
59%
37%
;j]Yl]\klYf\Ydgf]gh]jYlaf_eg\]d k!ZYk]\gfZmq]jhggd
58%
17%
Hjgna\]\Yf]klaeYl]g^gf]%lae]k]hYjYlagf[gklk
55%
25%
Hj]hYj]\n]f\gj\m]\ada_]f[]j]hgjl
33%
43%
Undertook
Most important
• Develop a value creation roadmap. Gfdq-1g^k]dd]jk
\]n]dgh]\YnYdm][j]YlagfjgY\eYhlg`]dhaf[j]Yk]
kYd]hja[]&:ml+/g^l`gk]kYql`YlaloYkl`]kaf_d]
egklaehgjlYflkl]h^gj[j]Ylaf_nYdm]&JgY\eYhkYj]Yf
aehgjlYfl[geemfa[Ylagflggdlgk`gohgl]flaYdZmq]jk
o`YlnYdm][j]YlagfafalaYlan]kl`]k]dd]j`YkafalaYl]\
gjhdYff]\$Yf\o`a[`[Yf]f`Yf[][gehYfqnYdm]
^mjl`]jgf[]l`]qYj][gehd]l]\Zql`]Zmq]j&=pYehd]k
af[dm\]hdYfljYlagfYdarYlagf$gh]jYlagfYdaehjgn]e]flk
Yf\Ydj]Y\qafalaYl]\j]n]fm]]f`Yf[]e]flgj
j]kljm[lmjaf_Y[lagfk&
@go]n]j$jgY\eYhkYj]gfdq[j]\aZd]o`]fk]dd]jk
\]egfkljYl]Y`aklgja[YdljY[cj][gj\g^Y[`a]n]e]fl&
L`akakhYjla[mdYjdqaehgjlYflo`]fal[ge]klgdYmf[`af_
f]ohjg\m[lkgjkm[[]kk^mddq[gehd]l]\J<hjg_jYek&
15
9j]qgmkljacaf_YZYdYf[]
Z]lo]]fkh]]\Yf\nYdm]7
G^[gmjk]$l`]a\]YdkalmYlagfaklg^gddgol`]d]Y\af_hjY[la[]k\ak[mkk]\afl`]hj]nagmkk][lagflg
]p][ml]l`]\]Ydima[cdqYf\eYpaear]kYd]hja[]&:mlg^l]f$[gehYfa]k^g[mkkgd]dqgfeafaearaf_
laeaf_Z][Ymk]\]Ydmf[]jlYaflq[gmd\\YeY_]l`]Zmkaf]kkgjZ][Ymk]l`]qmj_]fldqoYfllgj]afn]kl
[YhalYd]dk]o`]j]&9dl]jfYlan]dq$l`]qoYfllg`gd\g^^^gjY`a_`]jkYd]hja[]&O`]f[gehYfa]k^g[mk
kaf_d]%eaf\]\dqgfkh]]\gjnYdm]_gYdk$l`]q^j]im]fldqgeall`]f][]kkYjqkl]hklgY[`a]n]]al`]jgf]&
Kh]]\j]imaj]klYadgj]\hj]hYjYlagf^gjYÕfal]_jgmhg^Zmq]jk
O`]f[gehYfa]k^g[mkkgd]dqgflae]$l`]qg^l]flYc]k`gjl[mlkYf\j]d]Yk]af[gehd]l]gjafY[[mjYl]af^gjeYlagf&L`]j]kmdl
akl`YlZmq]jkeYq\jghgmla^l`]qÌj]fgl[ge^gjlYZd]oal`l`]afn]kle]fl[Yk]&H=Zmq]jk$afhYjla[mdYj$eYqdgk]^Yal`afl`]
eYfY_]e]fll]YeYf\f]_glaYlagfk[YfZ][ge]hjgljY[l]\YkZmq]jkdggc^gjYdl]jfYlan]jgml]klgYfko]jl`]ajim]klagfk&
L`akmf[]jlYaflqakg^l]fj]Ö][l]\afYdgo]jÕfYdg^^]j$hYjla[mdYjdqa^[geh]lalagf`Yk^Ydd]fg^^\mjaf_l`]Za\hjg[]kk&
L`]c]qlg]ph]\alaf_l`]\]Ydaklgmf\]jklYf\l`]dac]dqZmq]jkYf\`golghj]hYj]^gjl`YlÕfal]_jgmh&
How to expedite the process
Potential consequences of not taking this step
1
LYc]l`]lae]mh^jgfllg\]Õf]o`YlqgmÌj]k]ddaf_ o`YlYf\
o`gak_gaf_oal`l`]Zmkaf]kk!$mf\]jklYf\`go\]h]f\]flal
akgfgl`]jYj]Ykg^qgmj[gehYfq$Yf\[gfka\]jYf\hdYf^gj
hY[cY_af_ghlagfk
• ;gf^mkagfYegf_Zmq]jk
• K]dd]j[j]Yl]knYjagmkk[]fYjagkafÉj]Y[lan]Êeg\]Yf\
f]_glaYlagfklYc]dgf_]j
2
@Yn]Y[d]Yjna]ogfl`]egkldac]dqZmq]jkYf\l`]ajnYdm]
\jan]jk$[geemfa[Yl]l`]nYdm]^jgeYZmq]jh]jkh][lan]$
Yf\hj]hYj]^gjl`]ajj]kh][lan]ÕfYf[aYdj]imaj]e]flk
Yf\im]klagfk
• OYkl]lae]YfYdqraf_ajj]d]nYflaf^gjeYlagfgjZja\_af_
lgaf[gjj][l\YlYhj]nagmkdqhjgna\]\
3
Hgkalagfl`][gehYfqkm[`l`YlZmq]jkYj]Za\\af_gfa\]fla[Yd
h]jae]l]j \]Õfalagfg^f]l\]Zl$ogjcaf_[YhalYdlj]Yle]fl$
ljYfkalagfk]jna[]Y_j]]e]flk$]l[&!
9\\alagfYdlae]kh]fl]nYdmYlaf_Za\k
4
@Yn]Y[d]Yjdq\]Õf]\Yf\]p][mlYZd]k]hYjYlagfhdYfl`Yl
k`gokZa\\]jkYjgY\eYhg^`gol`]qoadd_]ll`]Zmkaf]kk
^jgeo`]j]alaklg\Yqaflgl`]aj`Yf\k af[dm\af_klYf\Ydgf]
[gklYfYdqkak!
:mq]joadd\]n]dghalkgofna]og^klYf\Ydgf]Yf\gf]%
lae][gklk$o`a[`oaddfglZ]^YngjYZd]lgl`]k]dd]j
5
Hjgna\]kmhhgjlYZd]$j]Ydakla[eYjc]lYfYdqkakYf\^gj][Ykl
FglYZd]lghgkalagfY[gfnaf[af_nYdm]klgjqÈZmq]j[gmd\
\ak[gmflhja[]gjoYdcYoYq^jgel`]\]Yd
6
L`afcYZgmlZmq]jÕfYf[af_j]imaj]e]flkYf\`]dhl`]e_]l
ÕfYf[af_ ]&_&$\]ZlakkmYf[]!
<]dYq]\[dgkaf_\m]lglae]lgÕfYf[]gj\ak[gmfl]\kYd]
hja[]YkÕfYf[af_akegj]]ph]fkan]l`YfYfla[ahYl]\
7
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klYl]e]flj]imaj]e]flk
DaealZmq]jhggdYf\l`]j]^gj]^YadlgeYpaear]nYdm]
8
LYc]lae]Yf\j]kgmj[]klgklYjll`]d]_Yd]flalqk]l%mhhjg[]kk
Egj]lae]lg[dgk]$gjklY__]j]\[dgkaf_\Yl]kZq[gmfljq$
a^k]hYjYl]d]_Yd]flala]kYj]f]]\]\
9
Mf\]jklYf\l`YlYÉkeYddÊZmkaf]kkakfglf][]kkYjadq
]Ykqlgk]hYjYl]
Mf\]j]klaeYl][gehd]palqgjj]imaj]\hj]hYjYlagflae]$
d]Y\af_lg]dgf_Yl]\ka_faf_Yf\[dgkaf_
K]ddlgYZmq]joal`Yf]paklaf_hdYl^gje
Dgk]nYdm]Yf\hgkkaZdqlae]2[gklkZmq]jegj]Yf\lYc]k
dgf_]jlg[j]Yl]Yf]oklYf\Ydgf][gehYfq
l`Yflgafl]_jYl]aflgl`]Zmq]jÌk_]g_jYh`a[gj
hjg\m[laf^jYkljm[lmj]
10
16
• Dgk]nYdm]a^Zmq]jk[j]Yl]l`]ajgofna]o
• Dgk][j]\aZadalqo`]fqgm[YfÌlYfko]jZmq]jim]klagfk
Sellers need to tell a strong,
credible value story and
weigh the opportunity costs
of waiting too long for the
right price
A^eYpaearaf_nYdm]akqgmj_gYd
O]km__]kll`Ylqgm^g[mkgfl`]^gddgoaf_[jala[Ydogjc
klj]Yeka^qgmj_gYdaklgeYpaear]nYdm]2
• Afn]klafnYdm][j]YlagfafalaYlan]klg
]f`Yf[]j]n]fm]Yf\eYj_afk
• 9lljY[lY\\alagfYdZmq]jk3kge]lae]kk]dd]jk
[gfÕ\]flaYddqk[gh]gmlafl]j]kl^jge[gehYfa]k
]&_&$ÉOgmd\qgmZ]afl]j]kl]\a^Y[]jlYafZmkaf]kk
[Ye]lgeYjc]l7ÊÉO`Ylogmd\Z]afl]j]klaf_lgqgm7Ê!
@gd\af_g^^gfka_faf_Y\]Ydmfladqgm_]lYkh][aÕ[nYdmYlagf
[gmd\e]Yfl`YlqgmoYkl]lae]Yf\]f]j_qYf\]f\mhoal`
fgZmq]j&L`]egj]lae]l`YlhYkk]k$l`]_j]Yl]jl`][`Yf[]
qgmjZmkaf]kk[gmd\_gaflg\][daf]^gjeYjc]lj]YkgfkYf\'gj
dY[cg^afn]kle]flYll`][gjhgjYl]d]n]d&9f\qgm[gmd\]f\
mhZ]af_^gj[]\lgk]ddYlY\ak[gmfl&Kgk]dd]jkf]]\lgl]ddY
kljgf_$[j]\aZd]nYdm]klgjqYf\o]a_`l`]ghhgjlmfalq[gklkg^
oYalaf_lggdgf_^gjl`]ja_`lhja[]&
• ;gfka\]jl`]Zmq]jkÌeaf\k]lYf\
[geemfa[Yl]hgl]flaYdZmq]jkqf]j_a]k
• ;j]Yl]Ykljgf_nYdm]klgjql`Ylqgmcfgo
oaddklYf\mhlgZmq]jk[jmlafq
L`]kh]]\%n]jkmk%nYdm][`Ydd]f_]
“The delay in divestment preparation
Yf\l`]af]^Õ[a]fl[ggj\afYlagf
between business functions affected
transaction value as market
conditions were changing drastically.”
Executive at a UK-based
technology company
“Because we were focused on
speed, we lowered the asset price
and did not do enough to search
out suitable buyers. Our hastiness
resulted in a failure to meet our
value expectations.”
Executive at a Netherlands-based
media and entertainment company
“Prioritizing operational steps and
then estimating the time required
for completion was the most crucial
aspect that we should have focused
on more. This heavily impacted the
time it took for the divestment.”
Executive at a France-based
ÔfYf[aYdk]jna[]k[gehYfq
“We didn’t do a good job of
identifying stranded costs or
providing transparency in the
ÕfYf[aYdklYl]e]flk&O]dgkl[gfljgd
of the situation, and it took us a lot
longer to close the deal.”
Executive at a US-based
oil and gas company
17
Conclusion
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=Y[`k][lgj`YkalkgofkljYl]_a[aeh]jYlan]^gjeYcaf_hgjl^gdagegn]kfgo&?dgZYdaf\mkljaYd
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hjg\m[lk[gehYfa]kYj]jYlagfYdaraf_ZjYf\k&;gehYfa]kafl`]l][`fgdg_qk][lgjYj][`Yf_af_l`]aj
Zmkaf]kkeg\]dk$Yf\afl`]gadYf\_Ykaf\mkljq$mhklj]YeYf\\gofklj]YeZmkaf]kk]kYj]Zj]Ycaf_mh&
:mlfgeYll]jl`]af\mkljq$d]Y\af_hjY[la[]klg]^^][l
ljYfk^gjeYlagfYd[`Yf_]Yj]kaeadYjY[jgkkl`]ZgYj\$
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afkapegfl`k$Ykcqgmj=Q[gflY[l^gjgmjRoadmap to
carve-out sale success&
About this study
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Produced in association with
Remark
Research from the Financial Times Group
18
How EY can help
EY’s dedicated, multifunctional divestment
professionals can help clients improve portfolio
management, divestment strategy and execution.
First, we help clients understand the performance of their businesses
relative to peers and the rest of their portfolio. And then we help clients
decide where capital can be released from underperforming or non-core
activities and reallocated toward higher-growth areas.
We then work with clients to prepare them for a divestment and become
an informed negotiator. Our work with corporate and PE clients includes a
variety of divestments, including sales of the entire company, carve-outs,
spin-offs and joint ventures.
For carve-outs, in particular, we advise on which businesses are worth
investing in and which may be worth more to another owner. Our sectorfocused teams can also help clients understand the effect a divestment
could have on the remaining company’s growth, brand and stakeholders.
Furthermore, we can help maximize transaction value by guiding you
through preparation and execution and removing any potential bumps in
the road before buyers get involved. For example, we create a compelling
value story by analyzing the growth opportunity, assessing underlying
trends and identifying hidden value in earnings, corporate allocations,
real estate, working capital, human resources, IT, operations and tax.
Finally, we assist with negotiations, Day One readiness, and helping your
company manage its remaining cost structure and focus on future growth.
Contacts
Pip McCrostie
EY Global Vice Chair
Transaction Advisory Services
[email protected]
+44 20 7980 0500
Steve Krouskos
EY Global Deputy Vice Chair
Transaction Advisory Services
[email protected]
+1 +44 20 7980 0346
Paul Hammes
EY Global Divestiture
Advisory Services Leader
[email protected]
+1 312 879 3741
Rich Mills
EY Americas Divestiture Advisory
Services Leader
[email protected]
+1 404 817 4397
Martin Hurst
EY Europe, Middle East, India and Africa
Divestiture Advisory Services Leader
[email protected]
+49 6196 996 27365
Stephen Lomas
=Q9kaY%HY[aÕ[<an]klalmj]
Advisory Services Leader
[email protected]
+61 3 9288 8441
Kenneth G. Smith
Japan Divestiture Advisory
Services Leader
[email protected]
+81 3 4582 6400
19
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