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.