|By PR Newswire||
|January 20, 2014 10:00 AM EST||
NEW YORK, Jan. 20, 2014 /PRNewswire/ -- Eighty percent of executives that based divestment decisions on a strategic portfolio review saw an increase in value, according to a new report from EY. The annual 2014 Global Corporate Divestment Survey, which surveyed more than 700 corporate executives globally, also reveals that 88% of companies left money on the table, at a time when no company can afford to lose deal value.
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.
"We're seeing more interest in divestiture activity both globally and in the Americas," said Paul Hammes, Global and Americas Divestiture Advisory Services Leader Transaction Advisory Services. "After hunkering down for a long period of uncertainty, more executives feel ready to make strategic choices that focus on strengthening companies' core offerings and ensuring long-term growth."
Survey Reveals 3 Leading Practices:
EY's survey results revealed three best practices to consider when undertaking a divestiture:
First, companies must know their core business. By assessing core competencies, redefining the operating model and understanding differentiators, companies improve investment focus. 85% of respondents saw an increased valuation multiple in the remaining business by basing the divestment on an updated definition of core operations.
Second, make better-informed decisions. This happens when senior management leads portfolio reviews and diversely skilled teams analyze robust business unit performance and industry benchmarks. Executives believe that improved industry benchmarks (45%) and better business unit data (39%) would increase portfolio review efficacy.
Third, act strategically. Divestments are strategic tools. When companies think of them as such and act on portfolio-review findings, it increases valuation multiples post-sale. Fifty three percent of executives believe portfolio reviews would be more valuable if companies dedicated resources to act on review results.
"These leading practices might seem obvious, however, it is surprising how many companies do not consider all of these when doing a divestiture -- causing them to leave money on the table and miss out on full value of the deal," said Hammes.
Drivers for Divestment in Key Sectors
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% of companies 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 products (58%), followed by 44% who said reduced demand or market share would make them consider divesting.
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.
Why Divest Now?
Divesting business units that are no longer strategically aligned with companies' core offering allows management to reallocate capital to higher-growth areas, and helps them create a more focused, better defined organization that investors value.
"We live with continuous change," added Hammes. "Whether it is technological innovation, shifting consumer demands or increased investor scrutiny, companies need to be proactive in actively managing their business portfolios, effectively allocating capital, meeting market needs, and driving long-term growth as no company can afford to lose value."
Planned divestments and the M&A story for 2014
The divestment plans of global executives will be a vital part of a developing M&A story for 2014. January could see the highest value recorded in the first month of the year in some time with three US$10b+ megadeals already announced in US, we are seeing a very robust start to 2014.
"Given some of the recent merger activity I think we may be in the initial phases of an M&A uptick," concluded Rich Jeanneret, Americas Vice Chair of Transaction Advisory Services (TAS) at EY. "Executives are continuing to proceed cautiously and are making fewer big bets than in the past. Ultimately the level of merger activity in the coming year will be determined by the degree of confidence in the macroeconomic environment and political stability."
Notes to Editors
About the survey
The EY Global Corporate Divestment Study analyzes leading portfolio review and divestment strategies and provides insights around a central thesis: Strategic portfolio management leads to improved divestment outcomes.
Results are based on 720 interviews with corporate executives surveyed over September and October 2013 by FT Remark, the research and publishing arm of the Financial Times Group.
The survey includes respondents from the Americas, Asia Pacific, Europe, the Middle East and Africa. While a broad range of industries is included, the study focuses on five key sectors: consumer products, life sciences, oil and gas, power and utilities and technology. Respondents stated that they have direct knowledge of or hands-on experience with their company's portfolio review and divestment activity.
EY is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 175,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Ernst & Young LLP is a member firm serving clients in the US. For more information about our organization, please visit ey.com.
This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
The modern software development landscape consists of best practices and tools that allow teams to deliver software in a near-continuous manner. By adopting a culture of automation, measurement and sharing, the time to ship code has been greatly reduced, allowing for shorter release cycles and quicker feedback from customers and users. Still, with all of these tools and methods, how can teams stay on top of what is taking place across their infrastructure and codebase? Hopping between services a...
Oct. 6, 2015 02:00 AM EDT Reads: 334
In his session at @ThingsExpo, Tony Shan, Chief Architect at CTS, will explore the synergy of Big Data and IoT. First he will take a closer look at the Internet of Things and Big Data individually, in terms of what, which, why, where, when, who, how and how much. Then he will explore the relationship between IoT and Big Data. Specifically, he will drill down to how the 4Vs aspects intersect with IoT: Volume, Variety, Velocity and Value. In turn, Tony will analyze how the key components of IoT ...
Oct. 6, 2015 02:00 AM EDT Reads: 230
Interested in leveraging automation technologies and a cloud architecture to make developers more productive? Learn how PaaS can benefit your organization to help you streamline your application development, allow you to use existing infrastructure and improve operational efficiencies. Begin charting your path to PaaS with OpenShift Enterprise.
Oct. 6, 2015 02:00 AM EDT Reads: 409
Decisions about budgets and resources are often made without IT even having a seat at the table. As technologist we understand the value of DevOps - but do your business counterparts? If they don't, your DevOps initiatives could lose funding before they start. In her session at DevOps Summit, Jeanne Morain, Strategist / Author at iSpeak Cloud, LLC, will provide insights on how to bridge the gap between business and technology leaders. Attendees will learn prescriptive guidance on balancing wor...
Oct. 6, 2015 02:00 AM EDT Reads: 560
Scott Guthrie's keynote presentation "Journey to the intelligent cloud" is a must view video. This is from AzureCon 2015, September 29, 2015 I have reproduced some screen shots in case you are unable to view this long video for one reason or another. One of the highlights is 3 datacenters coming on line in India.
Oct. 6, 2015 01:45 AM EDT Reads: 126
When it comes to IoT in the enterprise, namely the commercial building and hospitality markets, a benefit not getting the attention it deserves is energy efficiency, and IoT’s direct impact on a cleaner, greener environment when installed in smart buildings. Until now clean technology was offered piecemeal and led with point solutions that require significant systems integration to orchestrate and deploy. There didn't exist a 'top down' approach that can manage and monitor the way a Smart Buildi...
Oct. 5, 2015 11:45 PM EDT Reads: 193
SYS-CON Events announced today that Secure Infrastructure & Services will exhibit at SYS-CON's 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Secure Infrastructure & Services (SIAS) is a managed services provider of cloud computing solutions for the IBM Power Systems market. The company helps mid-market firms built on IBM hardware platforms to deploy new levels of reliable and cost-effective computing and hig...
Oct. 5, 2015 11:45 PM EDT Reads: 765
SYS-CON Events announced today that IBM Cloud Data Services has been named “Bronze Sponsor” of SYS-CON's 17th Cloud Expo, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. IBM Cloud Data Services offers a portfolio of integrated, best-of-breed cloud data services for developers focused on mobile computing and analytics use cases.
Oct. 5, 2015 11:00 PM EDT Reads: 607
Today, we are in the middle of a paradigm shift as we move from managing applications on VMs and containers to embracing everything that the cloud and XaaS (Everything as a Service) has to offer. In his session at 17th Cloud Expo, Kevin Hoffman, Advisory Solutions Architect at Pivotal Cloud Foundry, will provide an overview of 12-factor apps and migrating enterprise apps to the cloud. Kevin Hoffman is an Advisory Solutions Architect for Pivotal Cloud Foundry, and has spent the past 20 years b...
Oct. 5, 2015 10:45 PM EDT Reads: 688
While testing is often ignored when it comes to DevOps - it could be the most important aspect of achieving true DevOps success. Without rethinking automated testing from the ground-up, the entire DevOps productivity gain cannot be realized. Large tech companies build their own rapid test automation that runs in minutes across functional, performance, security and other tests. In his session at DevOps Summit, Kevin Surace, CEO of Appvance, will discuss how we learn from these real-world succe...
Oct. 5, 2015 10:00 PM EDT Reads: 418
DevOps has often been described in terms of CAMS: Culture, Automation, Measuring, Sharing. While we’ve seen a lot of focus on the “A” and even on the “M”, there are very few examples of why the “C" is equally important in the DevOps equation. In her session at @DevOps Summit, Lori MacVittie, of F5 Networks, will explore HTTP/1 and HTTP/2 along with Microservices to illustrate why a collaborative culture between Dev, Ops, and the Network is critical to ensuring success.
Oct. 5, 2015 09:45 PM EDT Reads: 687
SYS-CON Events announced today that Logz.io has been named a "Bronze Sponsor" of SYS-CON's @DevOpsSummit Silicon Valley, which will take place November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Logz.io provides open-source software ELK turned into a log analytics platform that is simple, infinitely- scalable, highly available, and secure.
Oct. 5, 2015 09:30 PM EDT Reads: 898
DevOps delivers remarkable results. But does it help all of IT? Can traditional ‘mode 1’ IT benefit as much as innovative ‘mode 2’? How about the rest of your business? Or have you just shifted your bottleneck? And if so, what can you do about it? Improving dev and ops is necessary, but not sufficient. It often just shifts the burden sideways (e.g., to PMs, SQA, InfoSec, DBAs, NOC, etc.), upstream (to the PMO, Controller, Business Liaison, etc.), or downstream (to TechPubs, Service Desk, Traini...
Oct. 5, 2015 04:00 PM EDT Reads: 688
The enterprise is being consumerized, and the consumer is being enterprised. Moore's Law does not matter anymore, the future belongs to business virtualization powered by invisible service architecture, powered by hyperscale and hyperconvergence, and facilitated by vertical streaming and horizontal scaling and consolidation. Both buyers and sellers want instant results, and from paperwork to paperless to mindless is the ultimate goal for any seamless transaction. The sweetest sweet spot in innov...
Oct. 5, 2015 03:30 PM EDT Reads: 120
Mobile messaging has been a popular communication channel for more than 20 years. Finnish engineer Matti Makkonen invented the idea for SMS (Short Message Service) in 1984, making his vision a reality on December 3, 1992 by sending the first message ("Happy Christmas") from a PC to a cell phone. Since then, the technology has evolved immensely, from both a technology standpoint, and in our everyday uses for it. Originally used for person-to-person (P2P) communication, i.e., Sally sends a text...
Oct. 5, 2015 01:15 PM EDT Reads: 157