Divestments are top of mind in corporates’ capital agenda strategy this year as companies seek to extract maximum value from strategic sales, according to EY’s 2016 Global Corporate Divestment Study, Learning from private equity: experts at extracting hidden value, an annual survey of corporate and private equity executives out earlier this year.
Reflecting the increasing focus on M&A as a route to reshaping businesses, 49% of companies are now planning to divest within the next two years – a significant increase from the 20% reported in last year’s survey. Only 5% of companies do not expect to make any divestments in the next two years compared to 56% in 2015. This suggests a greater appetite to strengthen and remodel core businesses in a rapidly changing environment.
Divestments are increasingly being employed as an essential path to growth, with 70% of companies using them to grow their core business, invest in new products and markets, and acquire a complementary business. Among companies that completed a divestment last year 39% re-invested the divestment proceeds back into the core business, 20% invested in new products, markets or geographies and 11% made an acquisition. Overall, 84% said they believe it created long-term value in the remaining business.
Download our sector reports to see the extent to which respondents felt they would have benefited from optimizing their legal structure in creating value pre-sale.
EY Legal Services Contact
Richard Norbruis – Global Transaction Law Leader