In the last six to nine months, says Jeff Greene, economic conditions have led to an increase in divestitures. Greene, Americas leader for Sell-Side Advisory Services at Ernst & Young LLP, spoke with me about the recent activity in the marketplace.
The slow growth in the economy has many shareholders focusing on how to allocate capital, resulting in more carve-outs, spinoffs and divestitures, according to Greene. "There is still an expectation among company shareholders to grow organically from existing operations," he says. "More shareholders may be more inclined to divest now because of the cost of capital increasing, the cost of debt going up and equity concerns because of increased volatility."
Industries such as mining, oil and gas, utilities, media, and airlines have been consolidating and restructuring. These players are divesting businesses that are not core and filling in gaps with acquisitions that are core. These industries have to divest in order to repay some of that debt, and in each of those industries you will see an example of hostiles, according to Greene. "I am also more likely to divest if I am concerned about being a potential target," Green explains.
I will speak with Greene more on Monday about how executive teams should plan for carve-outs.
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Maria WoehrHere are recent divestiture activities The Deal has covered.
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Rough goings at Sprint Nextel
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Virgin to appeal BSkyB ruling
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M&F to acquire Pearson unit
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Black Diamond counters Ch. 11
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Barclays Ventures buys Fila unit
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