|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.
"We have several customers now running private clouds. They're not as large as they should be but it's getting there. The adoption challenge has been pretty simple. Look at the world today of virtualization vs cloud," stated Nara Rajagopalan, CEO of Accelerite, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Sep. 27, 2016 12:00 PM EDT Reads: 2,306
"My role is working with customers, helping them go through this digital transformation. I spend a lot of time talking to banks, big industries, manufacturers working through how they are integrating and transforming their IT platforms and moving them forward," explained William Morrish, General Manager Product Sales at Interoute, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Sep. 27, 2016 12:00 PM EDT Reads: 3,822
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life sett...
Sep. 27, 2016 12:00 PM EDT Reads: 3,468
SYS-CON Events announced today that China Unicom will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. China United Network Communications Group Co. Ltd ("China Unicom") was officially established in 2009 on the basis of the merger of former China Netcom and former China Unicom. China Unicom mainly operates a full range of telecommunications services including mobile broadband (GSM, WCDMA, LTE F...
Sep. 27, 2016 12:00 PM EDT Reads: 1,773
Video experiences should be unique and exciting! But that doesn’t mean you need to patch all the pieces yourself. Users demand rich and engaging experiences and new ways to connect with you. But creating robust video applications at scale can be complicated, time-consuming and expensive. In his session at @ThingsExpo, Zohar Babin, Vice President of Platform, Ecosystem and Community at Kaltura, will discuss how VPaaS enables you to move fast, creating scalable video experiences that reach your...
Sep. 27, 2016 12:00 PM EDT Reads: 1,047
More and more companies are looking to microservices as an architectural pattern for breaking apart applications into more manageable pieces so that agile teams can deliver new features quicker and more effectively. What this pattern has done more than anything to date is spark organizational transformations, setting the foundation for future application development. In practice, however, there are a number of considerations to make that go beyond simply “build, ship, and run,” which changes ho...
Sep. 27, 2016 12:00 PM EDT Reads: 2,548
In his general session at 18th Cloud Expo, Lee Atchison, Principal Cloud Architect and Advocate at New Relic, discussed cloud as a ‘better data center’ and how it adds new capacity (faster) and improves application availability (redundancy). The cloud is a ‘Dynamic Tool for Dynamic Apps’ and resource allocation is an integral part of your application architecture, so use only the resources you need and allocate /de-allocate resources on the fly.
Sep. 27, 2016 11:45 AM EDT Reads: 2,699
Is your aging software platform suffering from technical debt while the market changes and demands new solutions at a faster clip? It’s a bold move, but you might consider walking away from your core platform and starting fresh. ReadyTalk did exactly that. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, will discuss why and how ReadyTalk diverted from healthy revenue and over a decade of audio conferencing product development to start an innovati...
Sep. 27, 2016 11:45 AM EDT Reads: 1,892
Complete Internet of Things (IoT) embedded device security is not just about the device but involves the entire product’s identity, data and control integrity, and services traversing the cloud. A device can no longer be looked at as an island; it is a part of a system. In fact, given the cross-domain interactions enabled by IoT it could be a part of many systems. Also, depending on where the device is deployed, for example, in the office building versus a factory floor or oil field, security ha...
Sep. 27, 2016 11:34 AM EDT Reads: 106
“We're a global managed hosting provider. Our core customer set is a U.S.-based customer that is looking to go global,” explained Adam Rogers, Managing Director at ANEXIA, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Sep. 27, 2016 11:30 AM EDT Reads: 2,967
SYS-CON Events announced today that SoftLayer, an IBM Company, has been named “Gold Sponsor” of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2016, at the Javits Center in New York, New York. SoftLayer, an IBM Company, provides cloud infrastructure as a service from a growing number of data centers and network points of presence around the world. SoftLayer’s customers range from Web startups to global enterprises.
Sep. 27, 2016 11:15 AM EDT Reads: 952
The vision of a connected smart home is becoming reality with the application of integrated wireless technologies in devices and appliances. The use of standardized and TCP/IP networked wireless technologies in line-powered and battery operated sensors and controls has led to the adoption of radios in the 2.4GHz band, including Wi-Fi, BT/BLE and 802.15.4 applied ZigBee and Thread. This is driving the need for robust wireless coexistence for multiple radios to ensure throughput performance and th...
Sep. 27, 2016 11:00 AM EDT Reads: 1,593
SYS-CON Events announced today that Secure Channels will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. The bedrock of Secure Channels Technology is a uniquely modified and enhanced process based on superencipherment. Superencipherment is the process of encrypting an already encrypted message one or more times, either using the same or a different algorithm.
Sep. 27, 2016 11:00 AM EDT Reads: 1,629
I’m going to cry tonight, long and hard. I’ll do so as I remember and mourn Jeremy Geelan. I knew Jeremy for almost 20 years, from the time he showed up one day at Cloud Expo’s headquarters in Bergen County, New Jersey, and went to work. The show wasn’t called Cloud Expo then, of course – it was still known as Java Edge, a pioneering event that grabbed developers, architects, and enterprise IT users alike for twice-yearly confabs. Jeremy didn’t have a job there, or even a job offer. He was s...
Sep. 27, 2016 11:00 AM EDT Reads: 3,748
SYS-CON Events announced today that Commvault, a global leader in enterprise data protection and information management, has been named “Bronze Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Commvault is a leading provider of data protection and information management solutions, helping companies worldwide activate their data to drive more value and business insight and to transform moder...
Sep. 27, 2016 11:00 AM EDT Reads: 2,693