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Alternative Market Briefing

Companies that executed M&As have performed well in 2019, survey finds

Friday, August 23, 2019

Laxman Pai, Opalesque Asia:

About half of companies buying other businesses' divested assets in the first half of the year outperformed an industry benchmark by an average of 1 percentage point (pp), while two-thirds of companies divesting assets during that period underperformed by 7pp.

According to Willis Towers Watson's Divestment Performance Monitor 53% of organizations that fall under the M&A umbrella have outperformed their industry benchmarks - based on share price performance in the first half of 2019.

The study, conducted in partnership with Cass Business School, shows the size of divestments affects the performance of the divesting company.

Companies divesting up to 5% of their total company value underperformed the market by an average of less than 1pp, while those divesting more than 15% underperformed by an average 6.3%.

The longer-term trend for firms divesting parts of their business has been similarly challenging with performance over the past three years at -3.6 pp and over the past decade at -2.8 pp.

The study also shows that the volume of divestments worth over $50m in the first half of this year has declined to its lowest level in the past decade, with 251 transactions taking place in H1 2019 compared with an average half-year total of 314 over the past decade.

Spin-offs were the only deal type to successfully buck the negative trend for firms divesting parts of their business, with a positive performance of +1 pp above the......................

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