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Don't Miss the Exit
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Don't Miss the Exit

Creating Shareholder Value through Divestitures

Jens Kengelbach, Alexander Roos and Georg Keienburg
Boston Consulting Group, 2014
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Editorial Rating

8

Qualities

  • Innovative

Recommendation

Mergers and acquisitions are on the rise, and many of these deals involve divestitures. For some firms, divestitures provide a way to raise cash and to deleverage. For others, divestitures can realign portfolios. Regardless of the reason for divesting, transactions can go terribly wrong for companies that don’t plan carefully or pick the right exit route. This concise article from Jens Kengelback, Alexander Roos and Georg Keienburg of the Boston Consulting Group provides keen insights into divestment strategies, investor reactions, and the potential pros and cons for companies. getAbstract recommends it to senior executives charged with planning and crafting divestitures.

Take-Aways

  • After a lackluster year for mergers and acquisitions in 2013, the market picked up steam in 2014. Divestitures are driving a growing number of deals.
  • Investors like divestitures, especially in highly leveraged firms, because they produce cash, shore up operating performance and allow companies to concentrate on their main businesses. “More than half of all divestitures create value.”
  • Divesting firms can execute a simple cash “trade sale” to a buyer; a “spin-off” to current stockholders; or a “carve-out, in which the parent company sells a partial interest to the public while retaining ownership.”

About the Authors

Jens Kengelback, Alexander Roos and Georg Keienburg work at various German branches of the Boston Consulting Group.

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