The Return Of The Strategist: Creating Value With M&A In Downturn

Sellers earn significantly lower returns from divestitures than from public-to-public deals, indicating that they need to improve their sales techniques. After adjusting for the relative size of the deal, the difference in returns is 11.8 percentage points. This equates to $28 million of lost value for the average divestiture when matched against a comparable public-to-public transaction. Institutional differences between public-to-public deals and divestitures might explain part of this gap in returns. But the persistence of this difference in returns throughout the deals in the sample indicates that companies that divest tend to undersell their assets.