The global M&A landscape has evolved significantly over the last few years, and corporate separation activity in particular is growing at an outsized pace as business leaders focus on transformation, risk management and creating shareholder value. In 2022 alone, more than 30 separations were announced globally across companies of all sizes, industries and geographies – representing 17% of announced separations in the last decade.
On average, separations generate excess blended returns of 6% over the 2 years post-separation, benefiting from dedicated management focus, operational improvements, tailored growth strategies and capital allocation priorities.
As the leading global M&A advisor for the past 20 years, Goldman Sachs has collaborated with leading consultant EY to develop a comprehensive analysis of the factors that influence the success of these transactions.
- Reimagining NewCo and RemainCoSeparations provide a catalyst for companies to transform by reprioritizing their strategies, with one company typically focusing on growth and the other focusing on margin improvement
- Deriving benefit from management focusSeparations provide an opportunity for leadership teams to focus on specific business priorities and avoid juggling the nuances inherent in a diversified parent
- Tailoring capital prioritiesSeparations allow for companies to redesign their capital structure based on their needs, with one company typically focusing on return of capital, while the other focuses on investment into organic and inorganic growth opportunities, including M&A
- Managing the processSeparations can be time-consuming and costly, but can be justified if the separation has long-term value-creation potential
- Communicating strategicallyseparations impact various stakeholders to differing extents, and frequent and transparent communication is important to manage their priorities
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