HANNOVER MESSE 2019, 01 - 05 April
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Industrie 4.0

Courage for divestments pays off

The global industry is undergoing a profound change that is seriously affecting Germany. This is not only reflected in investments, but also in the large number of divestments which were analyzed by EY Consulting.

06 Jun. 2018
HMI-ID05-076ds_ErnstYoung
Courage for divestments pays off (Picture: Ernst & Young GmbH)

In 2017, both the number and the total volume of sales of subsidiary business interests or investments in Germany reached the second highest levels since the beginning of data collection in 2010. According to this, the total value of divestments in the Federal Republic increased by 18% last year to 70.7 billion US dollars according to the Global Corporate Divestment Study 2018 Germany. 85% of German companies that have already gained experience with divestments are also planning further sales. A year ago, the rate was 46%. In total, industrial companies worldwide receive the highest transaction volume in divestments at 190.5 billion US dollars. Above all, digitization is driving this forward. It has a direct impact on the divestment plans of three out of four companies.

The spin-off of business units does not have to constitute anything bad, as the experts at Bain & Company found in their study. The analysis of 2100 listed companies showed that divesting companies achieved a 15% higher stock return over a period of ten years than those competitors who did not divest business units. Success is determined by a clear strategy, which consists of four elements. These include proactive portfolio management and the strategic preparation of the sale over six to twelve months. It is also recommended to intensively study potential buyers and their expectations as well as to consistently adapt the existing structures after the sale.