Respondents in this year’s survey are doing significantly more corporate divestitures. Asked how many divestitures they have done in the past three years, 51% say three or more, and another 30% say two. This is a substantial change from 2020, when just 32% said three or more, and from the 2017 survey in which 14% reported three or more divestitures and a majority reported just one.

The observed increase was not unexpected. In 2020, we forecasted that because of the pandemic and challenging economic conditions, “divestitures will undoubtedly play a critical role in defensive M&A response strategies and in building resilient portfolios for the ‘next normal.’” Many see the faster pace continuing: 43% say they expect to do three or more divestitures over the next two years, up from 18% in the 2020 survey. Another 27% expect to do two divestitures, for a combined 70% who say they plan to do two or more, a significant jump from just 36% in the 2020 data.

Why the increased divestiture activity? The top reason respondents cite as a motivation for a divestiture is a change in the market landscape. And in a separate question, 79% of survey respondents say the pandemic—surely one of the largest drivers of change in the markets and in the global economy—has had a high or moderate influence on divestiture strategy.

The divestiture motivation that respondents rank second was an opportunistic approach from an interested party. This was the No. 3 response in 2020 and was not in the top three at all in 2017. The data point reinforces the sense that today there are ready buyers for divested assets—and buyers coming to sellers instead of the other way around.

With so many willing buyers, sellers are pleased with the valuations they are achieving. In this year’s survey, 41% say the value they received from their most recent divestiture was higher than expected, a big jump from 11% in the pre-pandemic 2020 survey and 20% in the 2017 survey.

A market that makes it easier to obtain a relatively high valuation for divested assets may help explain a dramatic reordering in the priorities sellers report in our survey. We asked sellers to indicate their primary determinant in choosing a buyer for their most recent divestiture:

      1. Ability to execute quickly (25%)

      2. Secured funding (20%)

      3. Good fit for management and employees (16%)

      4. Speed and certainty to close (14%)

Highest price comes in fifth, selected by just 12% as the key factor in choosing a buyer—even though it was the top answer to this same question in the 2020 data. Indeed, the order of the top five factors in the current survey is essentially the reverse of the top five two years ago.

One reason a seller may prioritize a fast execution is that some corporate divestitures are the result of larger merger transactions in which the sale of assets is dictated by regulators. In such instances, getting a speedy deal close may be paramount and allow the retained business to quickly focus on integration and synergy realization, which may be many times more accretive to shareholder value than divesting non-core components.

There are indications that a considerable number of recent corporate divestitures have required more effort than the seller might hope. This highlights the importance of taking measures so successful sellers can be well prepared, with the right divestiture planning and capabilities in place.

The one-time cost of preparing to shed a business is rising: 75% of respondents say the cost of a divestiture was 4% to 7% of the revenue of the asset sold, while just 17% say the cost was 3% or less. In our 2020 survey, by sharp contrast, most respondents indicated the one-time cost was less than 3% of revenue. Separating non-core operations to be sold is a demanding task. Many sellers may choose to execute up-front work on the business to be divested to resolve entanglements. They may also invest in rapid pre-sale value creation interventions, thus presenting a more robust business to bidders. This no doubt adds to the overall cost of a divestiture but may be helpful in realizing better valuations.

For surveyed sellers that took more time than expected on their most recent divestiture, 48% cite regulatory approvals as an important reason, up from 40% in both 2020 and 2017. Prepared sellers should be aware of the regulatory implications of operational and legal entanglements, as well as keeping up with trends in the external regulatory environment.

A meaningful share of surveyed companies are also seeing divestitures affect their remaining businesses. Asked to assess the extent of disruption to core business caused by a divestiture, 7% of respondents say it was significant and 40% say moderate.

With this mixed picture—better outcomes on valuation and timeline, concerns around disruption and costs—we analyzed the survey data to look for correlations and clustering. What emerges is evidence that companies still have plenty they can do to proactively work toward better outcomes.

Just 18% of the survey cohort believe they do well across all three key measures, achieving higher-than-expected deal values, lower operational disruption, and less time than expected to complete the divestiture. At the other end of the spectrum, 31% of companies report experiencing broadly poor outcomes (lower valuations, more disruption, longer timelines).

In addition to examining motivations and outcomes, our survey asked respondents to discuss common practices related to corporate divestitures. This provides insights into how more deliberate divestiture planning and organized execution planning may lead to better outcomes for sellers.

We asked respondents about divestiture strategy, processes, and outcomes. One result shows that companies are reviewing their business portfolios more often: 54% of respondents say they strategically evaluate individual businesses at least two times a year (including 10% who say they do this more than three times a year). This is an increase from 2020, when just 17% of respondents said they review the portfolio two or more times per year. An increase in portfolio reviews and potentially resulting opportunities may have also contributed to respondents being more optimistic about divesting assets in the next 24 months.

More frequent reviews of the business mix, part of being a prepared seller, correlated with higher deal values. Among the small group (10%) that do reviews most often, 71% also report that they achieved a higher value than expected on their last divestiture. This could indicate active reviewers are more attuned to the current market dynamics and may be able to move more quickly to take advantage of conditions most ideal for their specific divestiture.

The survey data shows a similar correlation where we asked about efforts to pursue pre-close end-state optimization in a divestiture. Among the 16% of respondents who say they put high effort into end-state optimization prior to the close of the deal, 59% report that they achieve higher-than-expected deal value.

There were other correlations in the survey data that also reinforce these ideas. Survey respondents who report challenges with a lack of strategic communication or ineffective digital tools to execute their deals tend to require more time to complete their divestitures than those who did not see these as internal challenges. Similarly, those who use transition service agreements (TSAs) more frequently to sign up a buyer also seem less likely to report disruptions to their core businesses.