Using
Divestitures as a
Lever for Change
By Arthur Bert and Caroline
Firstbrook, Accenture |
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There
are several reasons for the surge. First,
divestments are often aprecondition for
approval of largemergers, required by regulators
whosejob is to guard against aggregations
of excessive market power. (Procter &Gamble
had to sell off its Right Guardand Rembrandt
lines before it couldacquire Gillette.)
Divestitures alsoprovide a way for companies
to tailortheir portfolio and raise capital
in orderto make acquisitions in markets
thathave greater strategic appeal. |
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And
intoday's buoyant private equity market—which
in 2003-2005 accounted formore than twice
the level of acquisitionactivity as from
1995 to 2005—thepresence of cash-rich
buyers willing tobid for most assets has
prompted manycompanies to put non-core businesseson
the block. CEO turnover, now runningat very
high levels, is another likelycause
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Takeovers and Leveraged
Buyout
by Gregg A Jarrell, professor
of economics and finance at the University of
Rochester's Simon School of Management
Corporate takeovers became a
prominent feature of the American business landscape
during the seventies and eighties. A hostile takeover
usually involves a public tender offer—a
public offer of a specific price, usually at a
substantial premium |
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| over the prevailing
market price, good for aspecific price,
usually at a substantial premium over the
prevailing market price, good for a limited
period, for a substantial percentage of
the target firm's stock...
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U.S. Leveraged Buyout Market From 1980-2002 |
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The leveraged buyout market rose to prominence
in the late 1980s when private equity firms such
as Kohlberg Kravis & Roberts ("KKR")
and Fortsmann Little were consistently making
headlines with large buyouts including the largest
leveraged buyout ever, KKR's $25 billion buyout
of RJR Nabisco in 1988. The success of these financial
sponsors (i.e., private equity firms) and others
in completing transactions and earning favorable
returns attracted many other parties to the industry.
There are currently hundreds of financial sponsors
focused on buying companies of all sizes across
many industries.
With an estimated $120 billion in uninvested capital,
hundreds of financial sponsors, and a difficult
M&A environment, private equity firms currently
face a challenging environment.
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