Divestment execution Most important financial factors for buyers More than half of PE respondents (56%) say growth potential • Sellers must provide credible information to buyers. is the financial factor they most prioritize, followed by Nearly two-thirds of corporate executives say they prepare potential EBITDA multiple and internal rate of return (IRR). It audited financials — and yet, lack of faith in information is the is therefore incumbent upon sellers to employ data analytics leading cause of PE buyers discounting a deal. Any potential (e.g., social media, predictive analytics) as well as traditional buyer needs to understand the deal-basis financials (e.g., commercial diligence to help buyers understand the growth how the company is being run, how it has performed, what potential. As for EBITDA, value creation bridges are critical to cash flow looks like on a pro forma basis) helping buyers identify efforts that can be undertaken to drive value post-close (and therefore the EBITDA multiple they are willing to pay). for PE buyers What are the two most important What makes a buyer walk away from a deal financial factors your company requires to stay in an auction or purchase process for corporate assets? Companies should understand how to create a compelling story for experienced buyers. Particularly among PE buyers, Growth potential there is often a stark difference between what sellers think 56% causes a reduction in offer price or a bidder dropout and what Potential EBITDA multiple PE firms say actually drives them away. 41% Corporates think that lack of confidence in the management IRR team and level of capital investment required are the most 38% likely factors. For PE respondents, the management team Stability of earnings is indeed important, but so too are inconsistent or declining 27% financial performance and commercial factors. Capital investment required We draw two major conclusions from these responses: 12% • Corporate executives may need to focus on different Return on assets employed priorities. Early in the process, PE wants strong 12% management in place. But while this will make them Revenue size interested in the asset, PE buyers also want confidence in 9% the financials. This means sellers must gather sufficiently One-time costs granular data to support the equity story 3% What factors do you think are most likely to make a PE buyer reduce its offer price or drop out of the bidding process? 44% 39% 33% 34% 33% 32% 36% 24% 27% 24% 23% 20% 17% 13% Lack of confidence Inconsistent or Commercial factors Lack of faith in Auction process Level of capital No clear plan in information declining financial (i.e., customer management team too competitive investment required of separation/ performance stability/growth (information complexity factors) is limited) Private equity Corporate 21