Deloitte: Executives to Pursue More Divestitures

By Rob Starr, Content Manager, Big4.com

According to Deloitte’s 2013 Divestiture Survey Report, Sharpening Your Strategy, Divestitures are being driven less by executives responding to financing needs and market changes, and increasingly driven by their companies’ strategic growth goals which render certain assets as non-core.

The Deloitte report indicates that domestic corporate buyers lead the pack as the buyer of preference for respondents. Nearly six in 10 (59 percent) of those surveyed indicate a preference for domestic corporate buyers. Anna Lea Doyle, M&A Principal, Deloitte Consulting LLP comments:

“The speed of these transactions was one of the top factors surveyed executives selected when choosing a buyer,” she said. “Buyers and sellers are up against an array of challenges ranging from regulatory to internal communications and retaining and mobilizing talent to execute the transaction. Indeed, almost three quarters of the executives surveyed indicate that they depend on outside vendors always or often to tackle the many hurdles dealmakers face with divestitures, with nine in 10 saying they do so at least some of the time.”

More than one-third (37 percent) of executives at companies that divested non-core assets over the last 24 months said the reason was limited growth potential, with non-synergistic products (30 percent) and poor operating performance (22 percent) also common reasons. Nearly half (47 percent) of respondents indicate that they expect divestiture activity to remain at the same level in the next 12 months as in 2012, while more than a quarter (28 percent) of respondents expecting an increase.

Deloitte’s annual Divestiture Survey was conducted online by Bayer Consulting from Oct. 17 through Nov. 2, 2012 and was completed by 148 executives, comprising both public (60 percent) and private (40 percent) companies. Annual revenues for 35 percent of represented companies exceeded $5 billion, with an additional 23 percent of companies generating between $1 billion and $5 billion. The vast majority (78 percent) of companies were headquartered in the U.S.