Global company divestment activity up 16 percent
December 29, 2017

 The value of global company divestments has reached US$1,113 billion so far this year, according to a new report from Deloitte (period covered is January 1-October 31 in 2016 and 2017).  The firm defines divestment as the disposal of a business entity or the spin-off of an asset from a wider group.

The value of divestment activity has increased 16 percent on the $958 billion for the same period in 2016, and up over 40 percent on the figure from five years ago. While values have increased, volumes of divestments have dipped 3.1 percent, from 11,923 in 2016 to 11,555 so far this year.  

In the UK, the value of divestments is up 70 percent, from $40 billion last year to $67 billion this year. Meanwhile divestment volumes are down by 7 percent from 652 in 2016 to 607 divestments this year.

Iain Macmillan, Deloitte's Global Head of M&A Services, comments: "The average size of a divestment is rising as businesses see this activity as a legitimate part of their growth plans, even divesting larger parts of the organization. Leaders increasingly feel that continuing to own an underperforming business might not be the best use of scarce capital.

"Private equity is getting more involved on the buying side, particularly in the UK, for example with Shell divesting its North Sea assets to private equity. Overall, even with political and economic uncertainty, companies are taking a longer-term view."

However future uncertainty is a concern for 123 global organizations recently involved in a divestment and surveyed by Deloitte this year. Over half the respondents (54 percent) expect divestments to become more challenging in the next 12 months due to market uncertainty.

Natalie Hall, Deloitte's Transaction Services Divestment Lead concludes: "In the current climate, actually divesting a non-core business is not getting any easier, especially given buyer universes are becoming more diverse and demanding. That is why preparation and providing more analytical data during the divestment process is key, as noted by over half of the respondents. Another challenge lies around transactional service agreements (TSAs), which can last as long as seven to 12 months in over half of the cases."

 





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 The value of global company divestments has reached US$1,113 billion so far this year, according to a new report from Deloitte (period covered is January 1-October 31 in 2016 and 2017).  The firm defines divestment as the disposal of a business entity or the spin-off of an asset from a wider group.

The value of divestment activity has increased 16 percent on the $958 billion for the same period in 2016, and up over 40 percent on the figure from five years ago. While values have increased, volumes of divestments have dipped 3.1 percent, from 11,923 in 2016 to 11,555 so far this year.  

In the UK, the value of divestments is up 70 percent, from $40 billion last year to $67 billion this year. Meanwhile divestment volumes are down by 7 percent from 652 in 2016 to 607 divestments this year.

Iain Macmillan, Deloitte's Global Head of M&A Services, comments: "The average size of a divestment is rising as businesses see this activity as a legitimate part of their growth plans, even divesting larger parts of the organization. Leaders increasingly feel that continuing to own an underperforming business might not be the best use of scarce capital.

"Private equity is getting more involved on the buying side, particularly in the UK, for example with Shell divesting its North Sea assets to private equity. Overall, even with political and economic uncertainty, companies are taking a longer-term view."

However future uncertainty is a concern for 123 global organizations recently involved in a divestment and surveyed by Deloitte this year. Over half the respondents (54 percent) expect divestments to become more challenging in the next 12 months due to market uncertainty.

Natalie Hall, Deloitte's Transaction Services Divestment Lead concludes: "In the current climate, actually divesting a non-core business is not getting any easier, especially given buyer universes are becoming more diverse and demanding. That is why preparation and providing more analytical data during the divestment process is key, as noted by over half of the respondents. Another challenge lies around transactional service agreements (TSAs), which can last as long as seven to 12 months in over half of the cases."

 



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