A recent report put out by the Boston Consulting Group (BCG)
indicates that companies are increasingly turning to asset
divestures as a means of enhancing shareholder value. According to
the report, divestitures have been steadily accounting for an
increased share of total M&A activity in recent years, reaching
a high of 48% of total global M&A deal activity in 2013. And if
the headline-dominating deals of the past year are any indication,
this trend has continued, and is likely to continue, throughout
2014 and into 2015.
Companies pursue divestitures for any number of reasons, but as
the BCG report explores, some of the most common are to get a
company re-focused on its core business and/or to generate cash.
With respect to the first of these objectives, it is well known
that bloated companies tend to trade at a discount if their size
and diversification is seen by investors as an impediment to the
company's ability to operate efficiently and effectively.
