Content thumbnail Global Corporate Divestment Study

Achieving divestment goals Use divestment proceeds for an acquisition A key to divesting successfully is not only to plan for the sale, but also to consider how to use the proceeds. Seventy percent of our respondents used the funds from their previous divestment to grow their core business, through investing in new products/ markets/geographies or acquiring a complementary business. On the whole, compared with last year, companies are more focused on investing in organic growth and less on using divestment funds for an acquisition or pursuing new markets. For example, compared with last year, 35% fewer companies are planning to make an acquisition with divestment proceeds (11% versus 17%). Those who did use their previous divestment to fund an acquisition were 62% more likely to have experienced a higher-than-expected valuation multiple on the remaining business post- sale than a company that used the funds to pay down debt (47% versus 29%). What did you do with the funds raised Percentage of high-performing deals for each use of from your last major divestment? divestment funds (measured by impact on valuation multiple of remaining business post-sale) 2016 results: Made an acquisition 70% divested 47% Pay down debt to fund growth Returned funds to shareholders 13% 42% 39% Invest in core Invested in new products/markets/geographies Return funds to 12% business 40% shareholders 17% 14% 34% 2015 results Invested in core business 17% 36% 23% Paid down debt 11% 29% Make an acquisition 20% Invest in new products/ markets/geographies Prove divestment value to your investors In order to have a positive effect on valuation multiple, How would you assess the valuation multiple of your it’s not enough to achieve a good sale price and close the remaining business after your last divestment? deal on schedule. Sellers must communicate the deal’s alignment with future strategic direction — why they are divesting, how they define their core business and how they will use divestment proceeds. In our survey, just over one-third of companies succeed in this regard: 38% said their most recent divestment exceeded expectations in terms of its effect on the valuation multiple of the 38% remaining business. More than half (55%) said their 55% Exceeded expectations divestments were in line with expectations. Met expectations Did not meet expectations 7% 8

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