Inflation is rising. So are interest rates, supply chain costs and cost of capital. CFOs know a portfolio approach to their business is the key to long-term shareholder returns. In other words: capital discipline. Yet companies aren't divesting in line with previous M&A cycles. In fact, the acquisition to divestiture ratio is at a 20-year high.
The fact remains, active portfolio management — doing both acquisitions and divestitures — generates the highest excess returns over industry peers. Then why do some companies decide not to divest at all? What prevents companies from making timely divestiture decisions?
A divestiture is a journey that can create value for the seller. However, many factors influence whether or not a company decides to divest. The research will uncover which factors have the greatest impact on seller return.
The study spans three phases of the divestiture process — portfolio review, divestiture execution and reinvestment. It explores a wide range of internal and external influences across four broad categories: context and market, structure, process and psychology.
In designing and performing the study and extracting insights from the data, we collaborated with two experts:
Often, research methods rely on either historical or survey data. We endeavored to go further. To test our hypotheses, we built a theoretical model and gathered data using a three-pronged approach. Sources of qualitative and quantitative data includes:
US Divestitures Services Leader, PwC US
John D. Potter
Deals Sector Leader, PwC US
Deals Partner, PwC US