The past year has underscored how quickly customer needs and technology requirements can change. Businesses that may have long been deemed critical to a portfolio could now unnecessarily be consuming resources and utilizing capital that should be deployed elsewhere. More companies than ever — 78% — say they continue to hold onto assets too long.
This year’s EY Global Corporate Divestment Study reveals that companies across the globe are failing to meet expectations for the price, timing and valuation multiple impact of divestments on the remaining business (RemainCo). Nearly 8 out of every 10 companies (79%) say their most recent divestment didn’t meet price expectations, while 56% globally say it did not generate the planned valuation multiple impact for RemainCo.
CEOs and CFOs can improve results by considering divestments as part of the company’s long-term strategy, rather than as one-off decisions driven by short-term financial concerns. With this strategic lens as the guide, there are three key ways executives can approach divestments:
- Develop a successful divestment strategy
- Elevate portfolio reviews
- Reimagine RemainCo