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Buyers and sellers can make the most of divestments through a value-centered approach to planning and post-closing transitional service agreements.

By Richard Butterwick, Robbie McLaren, Emily Cridland, and Katie Campbell

In the current deal market, corporates are taking an increasingly strategic and value-centred approach to planning carve-outs and divestments in order to maximise value. According to advisory firm EY, 84% of corporates recently questioned said they plan to divest an asset within the next two years, up from 20% in 2015. Streamlining operating models and managing a unit’s position in the market are most commonly cited as triggers for divestment. While financial distress can be a factor, EY’s findings demonstrate the analytical approach corporates are taking to divestments. This is echoed in recent deals we have advised on, including Telenor’s sale of its Central and Eastern Europe Business to PPF Group and Allergan’s sale of its global generic pharmaceuticals business to Teva.

In our view, corporates should approach each step of the carve-out process with two key factors in mind — what drives value in the carved-out business and how such value drivers will translate once the business is in the buyer’s hands.

Companies previously considered immune from activist campaigns have come under pressure, driving new public and private deal opportunities for private equity.

By Richard Butterwick, Christopher Drewry, Tom Evans, Harald Selzner, David Walker, Ben Coleman, and Catherine Campbell

US shareholder activists are an established presence in Europe. In 2018, activist campaigns targeted 160 European companies, according to Activist Insight. In the UK, 17 companies faced activist demands in the first quarter of 2019 alone. Activist funds have prompted public company boards to look more critically at their portfolio and product mixes, as well as their geographical footprints, either to avoid activist attention or to respond to activist activity.

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M&A activist campaigns that advocate for breakup or take-private transactions create obvious opportunities for PE firms. However, deal teams should take note of both recent activist strategies in the US and developments in the broader activist landscape. In our view, such strategies and developments will likely spread to Europe and create new PE opportunities.