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Press Release

Buying divested assets only M&A strategy to create shareholder value in 2019

Mergers and Acquisitions

August 21, 2019

Firms divesting continue to struggle to add value, significantly underperforming the Global Index 1 by an average of –7 percentage points, while those buying the assets do better

ARLINGTON, VA, August 21, 2019 — Based on share price performance, 53% of companies buying carved-out portions of other businesses in the first half of 2019 have outperformed their industry benchmarks by an average of 1 percentage point (pp), according to leading global advisory, broking and solutions company Willis Towers Watson’s Divestment Performance Monitor (DPM), in partnership with Cass Business School.2

This marginal outperformance is in contrast to companies that divested parts of their business this year, 63% of which went on to significantly underperform their MSCI Index with an average underperformance of –7 pp. While divestitures lose value across the board, the acquisition of a divested asset, as well as spin-offs, has an outperforming effect.

The study also shows that the size of divestments had an impact on performance for the divesting company. Companies divesting 0% to 5% of their total company value underperformed their market by an average of –0.8 pp in the first half of 2019. This rose to –6.9 pp for companies divesting 5% to 15% of their assets by value and –6.3 pp for those divesting over 15%.

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 $50 million 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 MSCI Index.

“Most companies are set up to buy assets, not sell them, which means decisions to sell are often made at the wrong time or in the wrong manner. Such mistakes are expensive,” said Duncan Smithson, senior director, Mergers and Acquisitions, Willis Towers Watson.

“The superior track record of spin-offs, transactions that are complex and require considerable preparation to address the many moving parts and situations that can go wrong, sets the standard for companies aiming to overcome the odds and sell well. Defining the right deal, managing talent uncertainty and rooting out stranded costs can make the difference between a divestiture that succeeds and one that destroys value.”

Insights from the data, which look at companies selling portions of a parent company to both listed companies and private equity buyers, include:

  • All regions underperformed: North American divestitures performed worst of all regions (–5.3 pp) in H1 2019, followed by Europe (–3.2 pp) and Asia Pacific (–2.0 pp).
  • Slower deals: Slow deals continue to dominate over quick deals (60% versus 40%), possibly contributing to the negative trend, as delays in execution can suggest loss of critical talent, internal struggles or stakeholders questioning the deal rationale.

“Despite the challenges involved, companies are likely to remain under pressure to proactively manage capital and make divestments to streamline product portfolios,” said Smithson. "Activist investors will also continue to push some companies to divest assets to reinvigorate company growth and unlock shareholder value.”

Smithson continued, “Selling a business is rarely a one-off activity. Our research shows companies that actively manage their divestiture portfolios in a selective and disciplined manner outperform competitors that sit on the sidelines. With time and practice, these companies create an institutional capacity to take advantage of divestiture opportunities at the right time, in the right way, to create the most value for their shareholders.”

Willis Towers Watson Methodology

  • All analysis is conducted from the perspective of public sellers.
  • Share price performance within the semi-annual study is measured as a percentage change in share price from six months prior to the announcement date to the end of the half year of completion.
  • Only completed divestitures with a value of at least $50 million which meet the study criteria are included in this research.
  • All private equity sellers are excluded in the sample.
  • Deal data sourced from Refinitiv.

About Willis Towers Watson M&A

Willis Towers Watson’s M&A practice combines our expertise in risk and human capital to offer a full range of M&A services and solutions covering all stages of the M&A process. We have particular expertise in the areas of planning, due diligence, risk transfer and post transaction integration, areas that define the success of any transaction.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential.


  1. The MSCI World Index is used as default unless stated otherwise, and median performance is used throughout.
  2. “The global database analyzes the share price performance of companies selling assets, from six months prior to the divestment announcement to up to six months after the divestment completion.
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