Dealmaking Confidence Rebounding In 2024

More business leaders are prioritising sales of parts of their portfolio this year, indicating that the dealmaking market is likely to rebound after a quieter 2023 – according to research from Deloitte.

Findings from Deloitte’s global bi-annual divestitures survey show that 60% of business leaders are assessing their willingness and readiness to sell by undertaking strategic reviews of their portfolios at least twice a year. This is an increase from 54% two years ago.

When asked about their expectations over the next 12-18 months, 79% of those surveyed said that they expect to consider at least three divestments. The level of expected activity has almost doubled from the same point in 2022, when the outlook was decidedly gloomier, with only 41% of business leaders expecting the same level of activity in the year ahead.

Fewer than 2% had no intention of selling any parts of their business.

Almost 65% of leaders said that they had received a higher-than-expected price for assets in their most recent divestiture; a jump from 41% two years ago. Although optimistic, caution should be urged, with 98% of respondents reporting that they had abandoned a sale in the last 12-18 months. The top reason was a change to internal strategy (37%), but external factors such as a lack of buyer interest (35%), changes in the competitive environment (34%), and regulatory challenges (33%) were also factors.

Reasons for further future sales differ amongst business leaders. 40% have concerns about the regulatory environment and tax regime in which they operate, 39% anticipate a change in market conditions, 35% cite a business no longer being part of their core business, and 35% will look to divest due to activist shareholders.

Jason Caulfield, Partner and Deloitte’s UK head of divestitures, said: “Our survey shows that companies are expecting to make more divestments in the next 12 to 18 months. Many businesses haven’t divested for some time and are in the process of readying themselves to do so. With anticipated interest rate reductions, opportunistic buyers will be waiting in the wings and those who can move now will do so to snap up good deals before valuation expectations reset."

“Given continued cost pressures and economic and political uncertainty across a number of markets, businesses should expect more scrutiny from prospective buyers than in recent years. Almost all survey respondents have reported an abandoned divestiture in the last 12-18 months, which shows that, even when there is both sell-side and buy-side appetite, parties will be prepared to take the tough decision to walk away from deals."

“To make the most of the divestment opportunities that will emerge from improving market conditions, businesses should review their portfolios now to identify potential divestments and prepare a robust value story that can stand up to heightened scrutiny by potential buyers.”