With pressure to increase shareholder value from low productivity assets, many companies are exploring the idea of divestures. Yet, a recent article by McKinsey & Company suggests that only 29 percent of divestitures achieve win-win scenarios, whereby both the parent company and divested business achieve excess total returns to shareholders (TRS) following the separation. What stands out about these companies? Speed appears to be the source of their success.
According to a study of major divestitures between 1992 and 2017 by McKinsey, separations completed within 12 months of announcement achieved higher excess TRS than those that took longer. A speedy … Continue Reading