Aktas et al. (2022)

Question 1

Divestiture =

Answer 1

Divestiture – divestment > acronym of Investment = SELLING (a unit they no longer need/can’t manage) It is the exact opposite of an investment

Question 2

When do companies divest

Answer 2

Companies divest more when they are larger and more secure and when they have lower evaluation on the market. More than half of the divestitures happen after a focal acquisition – that’s when the company is less sensitive to financing and regulatory needs. For companies who are acquisition-driven, divestitures bring value creation in association with acquisitions.

Question 3

Do companies who divest perform better?

Answer 3

Focused companies on divesting helps companies to get rid of the parts they do not know how to manage well. Outperformance in companies who divest by 40%

Question 4

4 steps to effective divestment

Answer 4

1) Understand which parts of the business are core and which are side. The temptation is for non- core businesses to be sold – not the right thing to do. First, it’s important to try and work on them to make them as attractive as possible, make a plan, a strategy.
2) Then, after that we try to find the right customers and negotiate with them why this part of the company is valuable for them to buy.
3) Try to make the transition to be smooth and not too impactful.
4) Do not lose the pace on reshaping the main business after the selling of the other part. Here, it is important that we make the company the right size, shape and go to the right direction, so it can have a more focused future.