《2024全球市场并购报告》(英)

GlobalM&AReport2024

Gaininganedgeinamarketreset

Acknowledgments

ThisreportwaspreparedbytheleadershipteamofBain&Company’sGlobalM&AandDivestiturespractice,withspecialdirectionfromLesBaird,partner;DavidHarding,advisorypartner;

DaleStafford,partner;KaiGrass,partner;SuzanneKumar,practicevicepresident;LindseyWhite,seniormanager;andaneditorialteamledbyDavidDiamond.

TheauthorswishtothankthemanymembersoftheBainleadershipteamwhocontributedarticlestothisyear’sreport.Additionally,wewishtothankthefollowingcolleaguesfortheirhelpwiththisreport:BainPartnersHarshveerSingh,PeterHorsley,andColleenvonEckartsberg;PracticeManagersDwightStallsandAnnaNowak-Dzialak;PracticeSeniorAnalystAmolMathur;ConsultantsShanePorterandAyshaRashid;SeniorAssociateConsultantJaysonChung;andAssociateConsultantKatieJones.ThisworkadditionallybenefitedfromthesupportofBainCapabilityNetwork’sAbhishekJain,RoopamKalra,ChhaviKhandelwal,SanyaKataria,YashovardhanDey,andSuprakashGosh.

Thisworkisbasedonsecondarymarketresearch,analysisoffinancialinformationavailableorprovidedtoBain&Companyandarangeofinterviewswithindustryparticipants.Bain&CompanyhasnotindependentlyverifiedanysuchinformationprovidedoravailabletoBainandmakesnorepresentationorwarranty,expressorimplied,thatsuchinformationisaccurateorcomplete.Projectedmarketandfinancialinformation,analysesandconclusionscontainedhereinarebasedontheinformationdescribedaboveandonBain&Company’sjudgment,andshouldnotbeconstruedasdefinitiveforecastsorguaranteesoffutureperformanceorresults.Theinformationandanalysishereindoesnotconstituteadviceofanykind,isnotintendedtobeusedforinvestmentpurposes,andneitherBain&Companynoranyofitssubsidiariesortheirrespectiveofficers,directors,shareholders,employeesoragentsacceptanyresponsibilityorliabilitywithrespecttotheuseof

orrelianceonanyinformationoranalysiscontainedinthisdocument.ThisworkiscopyrightBain&Companyandmaynotbepublished,transmitted,broadcast,copied,reproducedorreprintedinwholeorinpartwithouttheexplicitwrittenpermissionofBain&Company.

Copyright©2024Bain&Company,Inc.Allrightsreserved.

GlobalM&AReport2024

Contents

LetterfromtheLeaderofBain’sM&APractice................

....

.

.

.3........

StateoftheMarket.............................................

.....

.

..

.5

LookingBackatM&Ain2023:WhoWinsinaDownYear?.............

.....

.

..

.6

LookingAhead:HowtheBigBacklogWillShapethe2024M&AAgenda

......13..

HotTopics....................................

...

.

.

.18.........

GenerativeAIinM&A:WhereHopeMeetsHype.....................

.....

.

..

19

RegulationandM&A:HowScrutinyRaisestheBarforAcquirers......

.......24..

Industries............................................................30

M&AinAerospaceandDefense:FourThemes

ShapingSpaceIndustryDealsin2024.....................................32

M&AinAutomotiveandMobility:Dealsto

SecureaPlaceintheIndustry’sFuture .........................37........

M&AinBuildingProducts:VenturingbeyondtheCore....................43...CanConsumerProductsCompaniesMastertheSmallDeal?..................47M&AinRetail:WhyScaleStillIsParamountinGrocery.......................53M&AinBanking:ThreeSmallWavesofDeals...............................57M&AinInsurance:DealsAdvanceCapabilitiesandRiskPrevention.............61M&AinPayments:MakingStrategicMoves,withFewHeadlineDeals...........65M&AinWealthandAssetManagement:Finding

PocketsofOpportunityinaSlowYear.....................................69

M&AinEnergyandNaturalResources:

TheCircularEconomyIsNotLinear..............................................................................73

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GlobalM&AReport2024

M&AinHealthcareandLifeSciences:AShrinkingMarginforErrorinDeals..

.

.

..78

M&AinMedia:BigChangesAreForcingBoldMoves.....................

.

.

..82

M&AinTechnology:GettingSeriousaboutProductSynergies.............

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.

..85

M&AinTelecommunications:MakingtheRight

SelectiveBetsinaToughEnvironment........................

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.

.90........

Regions..................................................

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.

.96.........

M&AinBrazil:InternationalBuyersAct

WhileDomesticAcquirersShowCaution....................

...97.........

M&AinIndia:ContinuedOptimismFuelsMomentum......................101.

M&AinJapan:ResilientActivity—butNowIt’sTimeforMore.............105....

M&AintheMiddleEast:FromGreenEnergytoAsianExpansiontoFootball..

.

.

.109

Methodology......................................................

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.

.113

Keycontacts......................................................

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.116

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GlobalM&AReport2024

LetterfromtheLeaderofBain’sM&APractice

Dearfriends,

WepublishourannualM&Areporttohelpbusinessleadersgetbetterattheartandscienceofdoingdeals.

Inthis,oursixthreport,weanalyzewhy2023wastheyearthatbuyersandsellerscouldn’tagreeonvaluations,notinghowstrategicdealmultiplessanktotheirlowestlevelin15yearswhilepublicmarketvaluationsended2023nearall-timehighs.Ourreportincludesalookatthestateofthemarketandourviewoftheyearahead(optimistic).Italsodivesintospecificindustriesandregionsandexplorestheimpactofgenerativeartificialintelligenceandregulatoryscrutinyondealmaking.

Acommonthemerunningthroughthesechapters:Turbulenttimesproducestrategicwinnersandlosers,and2023wasnoexception.

LesBaird

LeaderofBain’sM&APractice

3

StateoftheMarket

LookingBackatM&Ain2023:WhoWinsinaDownYear?......................6

LookingAhead:HowtheBigBacklogWillShapethe2024M&AAgenda......13..

StateoftheMarket

LookingBackatM&Ain2023:

WhoWinsinaDownYear?

Dealsslowedasbuyersandsellerswaitedfortheothertomakethefirstmove..ByDavidHarding,DaleStafford,KaiGrass,SuzanneKumar,andLindseyWhite

AtaGlance

In2023,thetotalM&Amarketdropped15%,to$3..2trillion,thelowestlevelinadecade..

StrategicM&Adeclined6%asbuyersandsellersstruggledtoclosethegaponvaluations,andstrategicdealmultipleswerethelowestthey’vebeeninadecade..

Dealsweredelayedforotherreasons,includinghighinterestrates,mixedmacroeconomicsignals,regulatoryscrutiny,andgeopoliticalrisks..

Manylongtimefrequentacquirersused2023asanopportunitytoexpandtheircompetitiveadvantagethroughM&A..

It’snosecretthattheM&Amarketdeclinedin2023asthevaluationgapbetweenwhatbuyerswantedtospendandwhatsellerswantedtochargefortheircompanieskeptmanywould-bedealsfromhappening.M&Apractitionerstoldusthatthevaluationgapwasthebiggestobstacletodealmaking,andtherewereotherheadwindsin2023aswell,includinghighinterestrates,macroeconomicuncertainty,risingregulatoryscrutiny,andnewpoliticalpressures.

Butwhiledownoverallby6%invalue,thestrategicM&Amarketreflectedunevenperformance.Forexample,techdealscrateredwhileactivityinhealthcareandlifesciencesaswellasenergyand

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GlobalM&AReport2024

naturalresourcesrebounded.TheAmericasmarketheldsteadyasEuropeandAsiafaltered.Scratchbeneaththeplacidsurface,andyouseehow,acrossindustriesandaroundtheworld,winningcompaniesturnedtodealstoreinventtheirfuture,whetheritwasautomakersacquiringtosecuresuppliesforthetransitiontoelectricvehicles,insurersbuyingtoexpandtheirtraditionalroleofriskprotectiontoriskprevention,ormediacompanieslearningthatpartneringwithformerfiercecompetitorsistheonlywaytowinastheirindustryentersanewera.

Thecompaniesthatmadesuchmoveswillbethosethatemergeasleaders.PerhapsthemostimportantM&Anewsfrom2023,however,wasthewideningoftheperformancegapbetweenfrequentacquirersandtheirinactivepeers.Accordingtoourlong-termresearch,frequentacquirersalwaysoutperformintotalshareholderreturn.In2023,thatmargincontinuedtogrow.

Whatthenumberssay

TheworldofstrategicM&Astillsawmorethan27,000dealsannounced,totalingabout$2.4trillion,a6%declineinvaluefromtheyearbefore(seeFigure1).Ifthosenumbersseembetterthanwhatyoumayhavereadinthenewspapers,keepinmindthatthebroaderworldofleveragedprivateequityandventurecapitaldealshadamuchworsetime(down37%invalue).Thosebusinessesweremoreexposedtotheriseofinterestratesandissuesofdebtavailability.Incontrast,corporatebuyersgenerallyhadstrongerbalancesheetswithcashonhandtododeals.

Figure1:GlobalM&Adealvaluewas$3..2trillionin2023,down15%yearoveryear

M&Adealmarketvalue(intrillionsofUSdollars)

$6T

6.0

3.9

4.6

4.6

3.8

4.2

4.0

4

3.6

3.6

3.6

3.7

$3.3T

2.1

3.0

3.2

2.3

2.7

2.8

2.7

2.8

3.2

2

1.7

1.3

1.5

0

2000

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21

22

23

CompoundannualgrowthrateforallM&A(2022–2023),€15%

StrategicM&A,€6%

Financialinvestors,€34%

Venturecapital/corporateventurecapital,€42%

Specialpurposeacquisitioncompanies,4%

Note:StrategicM&AincludescorporateM&Adeals(whichincludesprivateequityexits)andadd-ons

Source:DealogicasofJanuary16,2024

7

GlobalM&AReport2024

Still,nodealmakercouldavoidtheimpactofrisinginterestrates.Nearlyeveryexecutivewespokewithandafull95%ofthosewesurveyedagreedthathigherinterestratesrequiredthemtoadapttheirapproachtoM&Ain2023.TheNo.1adjustment?Beingmoreselectiveinwhichdealsarebeingpursued,whichwascitedbytwo-thirdsofrespondents.

Butthebiggestobstaclewasthegapbetweenvaluations,whichcontributedtothelowestyearforstrategicM&Ainadecadeandcausedpricestoplunge.Thevaluationgapwastheonlythingthatsurveyedbuyersandsellersseemedtoagreeon.Morethantwo-thirdsofbuyerstoldusthatitnegativelyimpactedM&Aactivity.Ontheothersideofthetable,atnearlythesamerate,potentialsellerscitedmorefavorabledealvaluationsasatopfactorindecidingwhentobringtheirassetstomarket.Insomeways,2023willberememberedastheyearinwhichbuyersandsellerswaitedforeachothertoblink.

Anecdotally,weheardfromourinvestmentbankingfriendsthatanotablenumberofdealprocesseswereabandonedbeforebidswereacceptedthispastyear.Whywasitparticularlyhardtoclosethevaluationgapin2023?Ourresearchpointedoutfourcauses.

Again,risinginterestratesplayedamajorrole.Thebigargumentthroughout2023wastheshapeoftheinterestratecurveinyearstocome.Buyersneededdealstodeliveramarginofsafetyfromhigher-for-longerinterestrateswhereassellersheldbackinhopesthatrateswouldcomebackdown.

Asecondstraightyearofdecliningstrategicdealvaluationsmadedealmakerswary

(seeFigure2).At10.1times,overalldealmultipleswerethelowestin15years,withroomtofallfurther;mostdownturnsfindatroughbetween9timesand10times.Amiddecliningvaluations,buyerstookaskepticalviewofassetspricedwithpridewhilesellerssawlittlereasontogiveawayvalue.

Moreover,ahealthystockmarketin2023exacerbatedtheyawninggapbetweenprivateandpublicmarketvaluations.Withstockstradingwell,sellersandtheirshareholderspreferredtoholdontoassetsratherthanfacedilutionfromsellingatadepressedmultiple.

Finally,privateequityexitsweredown44%invalueand22%involume.Besidescuttingoffasourceofpotentiallyattractivetargets,deferredprivateequityexitsmeantthattherewerefewermarksforfairmarketvalue,furthercloudingpricetransparency.

Anotherfactorbehindfewerdealsisincreasedscrutinybyregulatorsaroundtheglobe.TheEuropeanCommission,theUKCompetitionandMarketsAuthority,andtheUSDepartmentofJusticeandFederalTradeCommissionhaveeyedmajormergerswithskepticism,particularlytechandhealthcaretie-ups.Atotalof$361billionindealshavebeenchallengedsince2022;mosthaveclosed,oftenwithremedies.Thedusthasnotyetsettledontheevolvingantitrustregulatorylandscapeascourtsweighinandnewguidelinesareproposed.Nationalsecurityconcernsalsoremainafactorforsensitivesectorssuchassemiconductorsornuclearenergy.Inthisenvironment,

8

GlobalM&AReport2024

Figure2:Strategicdealmultipleshaveplummetedforthesecondyearinarow,evenaspublicmarketvaluationsrebounded

Enterprisevalue–to-EBITDAvaluations,indexedto2014

Yearoveryear

2022–2023

4%

S&P500

StrategicM&A

€16%

2014 15 16 17 18 19 20 21 22 23

Notes:S&P500enterprisevalue–to-EBITDAvaluationsrepresenttheannualaveragemultiple;strategicM&Avaluationsrepresentthemedianmultipleforeachcalendaryear

Sources:DealogicasofJanuary16,2024;S&PCapitalIQ

somedealsmaynevergetofftheground;othersaremorelikelytobeabandonedinthefaceofachallenge.Weexploretheimpactoflongerandmoreuncertaintimelinesin“RegulationandM&A:HowScrutinyRaisestheBarforAcquirers.”

Lookingbeneaththesurface

Acrossindustries,thecollapseoftechM&AwasthebiggestdragonstrategicM&Ain2023(seeFigure3).Techdealvaluesdeclinedbyroughly45%asmedianvaluations,definedbyenterprisevalue–to-EBITDAmultiples,tumbledfrom2021’shighof25timesto13timeslastyear.Emerson’sacquisitionofNationalInstrumentstoexpandautomationcapabilitiesandCisco’sbidforSplunkforitscybersecuritycapabilitiespointtotheongoingdemandforhigh-quality

(andprofitable)techassets.Yet,aswe’veexploredelsewhere,ahigher-for-longerinterestrateenvironmentchangesthedealmathformosttechdealspredicatedongrowthoverprofitability(seeGlobalM&AReportMidyear2022orM&AMidyearReport2023:ItTakesTwotoMakeaMarket).

Atthesametime,ahealthydoseofbig-ticketdealssupportedastrongM&Ayearforenergyandhealthcare,promptedbydifferingsectordynamics.Onthebackofrisingcommodityprices,scaledealsinenergyandnaturalresourcesledthepack,withtwomegadealsinoilandgasandthreeadditionalmajortie-upscomprisingatotalofabout$175billionindealvalue,accordingtoDealogic.

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GlobalM&AReport2024

Figure3:HealthcareandlifesciencesaswellasenergyandnaturalresourcesM&Areboundedin2023butnotenoughtooffsetdeclinesintechandmanufacturing

Changeinstrategicdealvalue(inbillionsofUSdollars)

Retail

79

87

69

Telecommunications

37

Advanced

Financial

services

Media

Energyand

manufacturing

53

andservices

59

natural

3

Technology

resources

Consumer

Healthcare

113

products

andlife

sciences

213

Year-over-year

percentage43%

19%

23%

50%3%32%126%

29%

17%

change

Source:DealogicasofJanuary16,2024

CompaniesinhealthcareandlifesciencescontinuedtheirpursuitofgrowthviascopedealsasrepresentedbyAbbVie’sback-to-backdealsforImmunoGenandCerevelTherapeuticsinDecemberandMerck’searlieracquisitionofPrometheus.

Theyearsawacommonthreadofverticaldealmaking.Companiesnavigatingashocktotheprofitpool,whetherashiftfrominternalcombustionenginestoelectricvehiclesortheriseoftheInternetasadistributionchannel,haveturnedtoM&Atotransform.Automotivecompaniesaredoingdeals,suchasStellantis’sinvestmentinLytenandFord’sacquisitionofAutoMotivePower,tosecureaccesstocriticalchargingtechnologyandtoinvestintheirownrecharginggrids.Inmedia,thevaluechainhasbeenredesignedthroughmergingofcontentanddistribution,leadingtonewstrategiesforpartnershipsandalliances.

VerticalM&Acanalsoreflectadaptivestrategiesinthefaceofindustryconsolidation.IntheUS,healthcarepayersareusingM&Atobuildhealthdeliverynetworks,asexemplifiedbyCVS’spurchaseofOakStreetHealththisyear.

Spin-offsremainedanessentialtoolinportfoliotransformationaswell.Forexample,Danahercontinueditsreorientationtowardlifesciencesviaa$23billionspin-offofitswaterbusiness(Veralto)whileacquiringAbcamanditsproteinconsumablesbusinessfor$5.7billion.Sanofijoined

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GlobalM&AReport2024

otherhealthcarecompaniesinannouncingtheseparationofitsconsumerhealthbusiness.Spin-offsareexceedinglyhardtogetright,buttop-quartileperformersshowhowvaluabletheycanbe(see“WhenaSpin-OffWinsBig”).

Notably,cross-borderdealmakingwassustainedasinvestorssoughttoenhanceportfoliosinmorefavorablemarkets.USbuyerspursuedmorecross-borderdeals,up34%invalue,whiledomesticvaluerose2%.Similarly,Brazilremainedattractivetoforeigninvestment,evenasdomesticdealmakingdeclined(see“M&AinBrazil:InternationalBuyersActWhileDomesticAcquirersShowCaution”).Asiasawa60%increaseindealsfromtheMiddleEastassovereignwealthfundssoughttobuildsupplychainsandfacilitateenergytransitions.

Andmegadealsmadeamarkinthesecondhalfof2023,apossiblesignalthatdealmakerswerereadytolookforward.ForM&Aobservers,thetimingwasn’ttoosurprising.Manycompanieshadsustainedhighlevelsofproactivedealscreeningandoutside-induediligenceevenasdealcountsfell.Somedeals,suchasChevron-Hess,wereyearslonginthemakingifopportunisticintiming.Others,suchasCarrier’sacquisitionofViessmannClimateSolutions,reflectedabetonlong-termtrends.

Figure4:Frequentacquirersstayedinthegamethroughoutrecenttimesofturbulence

MostfrequentacquirerscompletedanacquisitionduringCovid-19period…

andcontinuedtoconductM&Athroughaperiodofhigherinterestrates

PercentagethatcompletedadealduringCovid-19period

Percentagethatcompletedadealduringpost–ratehikeperiod

67%

71%

38%

14%

12%

0%

Frequent

Infrequent

Inactives

Frequent

Infrequent

Inactives

acquirers

acquirers

acquirers

acquirers

Notes:Bain’svaluecreationstudytracksperformance(measuredbytotalshareholderreturn)andacquisitionfrequencyfor2,533companiesovertheperiodbetween2012and2022;Covid-19periodincludesdealsbetweensecondquarter2020andfourthquarter2021;post–ratehikeperiodincludesdealsfromthirdquarter2022tothirdquarter2023

Source:BainM&AValueCreationStudy,2023

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GlobalM&AReport2024

Finally,theyear2023showedusawideningofthegapbetweenhowfrequentacquirersandtheirinactivepeersbehaveinM&Adowncycles.Youhaveheardussaymorethanoncethatfrequentacquirersoutperformthroughoutalleconomiccyclesandtendtostayinthemarketthroughgoodtimesandbad(see“M&AinTimesofTurbulence:LessonsfromtheLastRecession”).WhenwelookbacktotheCovid-19period,forexample,weseethatmostfrequentacquirersneverstoppeddoingdealsevenasthemarketoverallcontracted.ThesameheldtruewiththecurrentmarketdropthatbeganwiththeintroductionofhigherinterestratesinJune2022(seeFigure4).Mostfrequentacquirerskeptacquiring.

Mostfrequentacquirersneverstopdoingdealsevenasthemarketoverallcontracts.

Perhapscounterintuitively,today’sdownmarketsignalsalonger-termfundamentalshift:Thosefrequentacquirersthatstayactivearepullingawayfromlessacquisitiveorinactivecompaniesasmeasuredbylong-termtotalshareholderreturns.Bainresearchshowsthatthebenefitsoffrequencyareonlyincreasingovertime.Whileothersstayonthesidelines,itiscompaniesthatinvesttoacquirethroughcycles,deployingtestedandtailoredtoolkitstotransformtheirbusinesses,thatultimatelyemergeasthewinners.

Kudostofrequentacquirersthatstayinthegamethroughthickandthin.

Inthefollowingchapter,wediscusshowthe2023M&Amarketdynamichascreatedagrowingbacklogofdealsthatawaitanysignthatbuyersandsellerscancometoterms.

12

StateoftheMarket

LookingAhead:HowtheBigBacklogWillShapethe2024M&AAgenda

Theprocesses,skills,andtoolsusedinthepastwillbeinsufficienttostayaheadofthenewgame..ByDavidHarding,DaleStafford,KaiGrass,andSuzanneKumar

AtaGlance

Manyoftheassetsthatdidn’tcometomarketinthedownyearof2023willfuelactivedealmakingin2024..

Corporateswillsellassetsthatdonotfitwiththeirstrategy,andprivateequitywillsellagingportfoliocompanies..

Weexpectmorescaledealsforconsolidationbeforeseeingareturntoscope-orientedcapabilityinvestingtodrivegrowth..

Ascompetitionintensifies,convictionandspeedwillbenecessarytowindealsandmakethemsucceed..

Historyshowsthatdownturns,marketlulls,andtimesofdisruptionalwaysproducenewer,strongercompetitorsthatusedthemayhemtomakemarketgains.TheM&Adownturnof2023willlikelybenoexception,butitisnottoolatetoact.

Weexpecttoseemoredealsgetdonein2024—iffornootherreasonthantherearealotofassetsthatshouldtrade.Wecallitthe“bigbacklog.”Forexample,whileweoftentalkalotaboutprivateequity(PE)drypowder,wealsonowhaveabacklogofPEportfoliocompaniesthatneedtocometo

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GlobalM&AReport2024

market.Manyofthesewillbeboughtbystrategics;otherswillberolledintootherfinancialsponsorportfolios.Likewise,ourexecutiveinterviewssuggestthatcorporatesheldontoassetsthatnowshouldbedivestedandorspunout.These,too,weexpecttocometomarket.

Forthemostpart,corporatebalancesheetsremainstrong,withlotsofcashonhand,andthecycleofinterestratehikesseems,asofthiswriting,tohaverunitscourse.Anycertaintyaroundcostofcapitalwillbeaboontodealmaking,andevenmoresowillbeareductionininterestrates.

TheM&Amarkethasalwayshadabitofboom/bustnaturetoit.Experiencedpractitionerstellusthatwhenthereboundindealscomes,itwillmostlikelybefast—probablymorescaledealsfirst,asindustryconsolidationplayscontinue(see“M&AinEnergyandNaturalResources:TheCircularEconomyIsNotLinear”),andthenareturntoscope-orientedcapabilityinvestingtodrivegrowth.

Ofcourse,therearestillsomethingsthatwillholddealvolumesandvaluesback.Regulatoryscrutiny’sgreatestimpactmaybeinstoppingdealsbeforetheyevergetstarted.Atthesametime,geopoliticaltensionsmaywellkeepthelidoncertaincross-regionaldeals.And,ofcourse,havingbeenhitbyseveralrecent“blackswan”events(pandemicsandwar,tonametwo),weremainhumbleinourpredictionsregardingfutureevents.

Thatsaid,weexpect2024tobeabusyyear.Let’slookattheM&Aagendathatwillgivedealmakerstheedgeintheyearahead.

TheM&Amarkethasalwayshadabitofboom/bustnaturetoit.Experiencedpractitionerstellusthatwhenthereboundindealscomes,itwillmostlikelybefast.

Proactiveandprepared

Whywasdealactivityin2023soanemic?Thesimpleansweristhatwithvaluationssolow,sellersdidnotwanttosell.

Indeed,abigcomplaintbyprospectivebuyersthatdidfewerdealsin2023wasthattherewerefewattractiveassets,accordingtoourexecutivesurvey.Yet,successfulbuyershadnocomplaint.That’sbecausetheycreatedtheirowndealflowthroughproactivesourcingandscreening.Andthesearethesamecompaniesthatwillbereadytocapitalizewhenthebigbacklogofdealsbreaksinthemonthsahead.

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GlobalM&AReport2024

Ourconversationswithexecutivespointtotwobacklogs—corporateentitiesthathaveassetsthatdonotfitwiththeirlong-termstrategicprioritiesandPEportfoliocompaniesthatareagingintheirfundsandneedtobesold.Neithergrouphasbeenoverlyinclinedtosellassetsoverthispastyear,butforverydifferentreasons.

Corporatesdon’tsellforabunchofreasons,thetopthreebeingbandwidth,cashflow,andinertia.Sellingbusinessesisatimesinklikenoother.Stressed-outmanagementteamsoverthepastfewyearshavenothadtheluxuryofcleaninguptheirportfolio.Whentheydowanttosellanasset,thereoftenaretwocomplications:Thenonstrategicassetsstillcontributecashflow,andtheirdivestmentwillleavestrandedcostsbehind.Andintheabsenceofactivistinvestors,itisjusteasiertoleavethingsinplace,especiallywhendealvaluationsaredownandstockpricesareup.

Butourexperienceshowsthathangingontoassetstoolongleadstovaluedestructionandmisallocationofcapitalandmanagementattention.Disappointingprospectivevaluationscandissuadecompaniesfrommakingthecalltosell.Then,aweakerver