AURELIUS Equity Opportunities Corporate Carve-Out Survey 2023

London, 21 December 2022 – AURELIUS announces the results of its 8th annual AURELIUS European Corporate Carve-Out Survey. The survey canvasses corporate and advisory professionals to reveal year-on-year trends in the market and predictions of future trends. This year’s edition was conducted between 17 November and 12 December 2022, gathering insights after a volatile period since the last survey was conducted, during which corporates have experienced a potent cocktail of inflationary pressures, rising interest rates, and geopolitical shocks.

The survey reveals that 78% of respondents expect the volume of corporates divesting non-core European and UK businesses in 2023 to increase year over year (YoY). According to participants, a key factor driving this activity will be businesses attempting to refocus on core operations as a consequence of sustained macroeconomic headwinds. However, despite anticipation of robust levels of divestment activity, the survey revealed a lack of consensus regarding whether the high levels of overall M&A activity witnessed in 2022 will be continued into 2023.

These findings align with an overall picture of a stuttering global economy and weakening corporate confidence. Furthermore, in line with the findings of the previous AURELIUS Corporate Carve-Out Survey, conducted shortly after the Russian invasion of Ukraine, geopolitical factors will continue to be a core consideration for corporates seeking to divest non-core businesses and investors seeking value in European markets in 2023.

In 2022, AURELIUS has completed various successful corporate carve-outs from vendors including Orica, McKesson, Saint Gobain, JD Sports, Sappi and Agfa-Geveart.

KEY FINDINGS:

The level of global corporates divesting non-core businesses in 2023 is likely to increase relative to 2022.

• 78% of respondents expect that the number of European and UK corporates looking to sell non-core European and UK businesses in 2023 will increase YoY.
• 63% of respondents anticipate that the number of non-European corporates wanting to sell non-core European and UK businesses will increase in 2023 YoY.

An impending global recession will accelerate plans to divest non-core businesses by European and UK corporates driven in large part by the need to refocus on core operations.

• 71% of respondents agreed that an expected global recession will accelerate the plans of European and UK corporates to divest non-core businesses in 2023.
• 84% of respondents believe that a need to refocus on core operations will be a key driver of divestment activity, with 45% of respondents also selecting the need to reduce debt burdens and 43% selecting the need to reorientate a business from a weak market position as key drivers.

As the war in Ukraine continues and global trade grows increasingly fraught, geopolitical uncertainty will be a crucial factor in driving global corporates to sell non-core European businesses in 2023.

• 47% of respondents cited geopolitical uncertainty in the operating region as a driver of divestment of non-core European businesses by non-European corporates.
• And 67% identified geopolitical uncertainty as the factor that will have the largest impact on corporate divestment activity in 2023.

There is no consensus as to whether the high levels of M&A activity seen in 2022 will be continued in 2023.

• 46% of respondents agreed that high levels of M&A activity seen in 2022 will continue into 2023, with 42% disagreeing and 12% neither agreeing nor disagreeing.

Matthias Täubl, CEO of AURELIUS Equity Opportunities, said: “As the collective insight of our investment and advisory network has previously shown, refocusing on core operations is a key driver of divestment activity in Europe and the UK. As the Ukraine War continues and the resulting energy crisis takes hold across the continent, it is unsurprising that respondents continue to regard geopolitical uncertainty as a vital factor when analysing why businesses will seek to streamline operations. It will be intriguing to witness whether economic conditions stabilise and the effect this will have on divestment activity in the new year.”

Tristan Nagler, Partner at AURELIUS, added: “These findings indicate that whilst sustained macroeconomic headwinds are likely to suppress overall M&A activity levels compared to 2022, levels of corporate divestment are set to be sustained into the New Year. Furthermore, the survey confirms what has been a perennial finding of previous surveys: divestment activity will be driven by businesses wanting to redirect focus on key business lines. However, as noted by the survey’s respondents, the increasingly gloomy economic picture will likely precipitate a lowering of valuations, increasingly complex due diligence processes, and a shrinking of financing options available to investors.”

FULL REPORT SUMMARY:

• 78% of respondents expect the number of European and UK corporates looking to sell non-core European and UK businesses in 2023 to increase YoY, with 14% expecting it to decrease and 8% expecting it to stay the same.
• Expectations are slightly more split regarding sales of non-core assets by non-European corporates, with 63% of respondents expecting the number of corporates from outside Europe looking to sell non-core European and UK businesses in 2023 to increase YoY, with 10% expecting it to decrease, and 28% expecting it to stay the same.
• 83% of respondents expect the industrials market segment to see the most sales of non-core businesses in 2023.
• An overwhelming majority (73%) of those surveyed expect an impending global recession to increase the volume of non-core divestment activity by European and UK corporates.
• The survey revealed that the DACH region, the UK, and France are the geographies respondents anticipate will see the most disposal of non-core businesses in 2023, with a 75%, 67%, and 35% selection rate, respectively.
• 33% of respondents expect corporates with annual revenues of between EUR 1.0 bn – EUR 5.0 bn to be the most likely bracket to sell non-core businesses in 2023.
• Turnaround / special opportunities investors are expected to be the most active buyers in the market for corporate divestments, with 33% of respondents selecting this option, 25% selecting trade / corporate buyers and 14% selecting traditional financial sponsors.
• The complexity of delivering the carve-out (71%), matching vendor’s value expectations (63%), and financing difficulties (59%) were the most selected factors as being barriers to the completion of a successful divestment.
• Geopolitical uncertainty (67%), reducing complexity to focus on core strategy (59%), and high corporate debt levels were selected as the factors that will have the largest impact on divestment activity in 2023.
• 39% of respondents expect that ESG considerations will have a marginal influence on M&A activity in 2023.
• 46% of respondents agreed that high levels of M&A activity seen in 2022 will continue into 2023, with 42% disagreeing and 12% neither agreeing nor disagreeing.
• 71% of respondents agreed that credit market stability will be key in determining corporate carve-out activity in 2023, with 18% disagreeing and 12% neither agreeing nor disagreeing.

AURELIUS Equity Opportunities Corporate Carve-Out Survey 2022

London, 30 March 2022 – Geopolitical uncertainty has the potential to overshadow investors’ confidence at the start of the year that corporate carve-out activity across Europe will increase in 2022. This survey, which opened shortly before the Russian invasion of Ukraine, provides an interesting snapshot of how attitudes towards deal flow in 2022 have evolved with a number of respondents citing geopolitical uncertainty as a key driver naturally increasing over the period.

The seventh annual AURELIUS Corporate Carve-Out Survey revisited year-on-year trends and investigated how unprecedented levels of dealmaking have influenced perceptions and predictions for the year ahead. The survey reveals that 80% expect the volume of corporate carve-outs to increase in 2022 (verses 89% in 2021 and 60% in 2020). The biggest barrier to successful divestments is perceived to be (by 46.3% of respondents) matching vendor’s sale expectations.

These findings align to an uncertain macro-economy and excessive corporate debt which are complicating due diligence and business valuations. This contrasts to previous years, consecutively revealing the highest bidder and ability to execute would drive corporate carve-out activity, before the unprecedented volatility created by continuing geopolitical instability.

Every year the AURELIUS Corporate Carve-Out Survey canvasses corporate and advisory professionals to reveal year-on-year trends in the market and predictions of what lies ahead. This year’s survey was conducted between 21 February and 25 March 2022.

Key findings:

The level of non-core European and UK businesses divesting in 2022 may increase relative to 2021.

• 80% of the respondents believed that the number of European and UK corporates looking to sell non-core European and UK businesses in 2022 will increase YoY.
• Merely 2% of respondents perceived that the number of non-European corporates wanting to sell non-core European and UK businesses will decrease in 2022.
• 51.2% of the respondents agree that ‘Brexit will increase the level of divestments of non-core UK businesses in 2021.'

The need to refocus on core operations will be a major driver for non-core European and UK businesses divesting in 2022.

• Over 75% of the respondents perceived the need to refocus on core operations will drive European and UK corporates to sell non-core businesses in 2022.

ESG and technology will be an important focus for firms looking to buy non-core European and UK businesses in 2022.

• 75% of the respondents agree or strongly agreed that ‘The Covid-19 pandemic has proven the long-term value and resilience of tech-enabled businesses.'
• About 85% of the respondents agreed or strongly agreed that 'ESG will have a greater impact on transaction valuations in 2022.'

Matthias Täubl, CEO of AURELIUS, said: “The collective insight of our investment and advisory network confirms that refocusing on core operations is a key reason for businesses in UK and Europe to divest their non-core businesses. It is also clear that ESG is having a greater impact on our investment decisions and buyers and sellers need to be taking this into greater consideration in their valuations. Last year’s carve-out activity proved to match the expectations of the 2021 Corporate Carve-Out Survey, a lot is left to be seen as to how the geopolitical situation shapes the corporate carve-out landscape across Europe.”

Tristan Nagler, Partner at AURELIUS, added: “These findings indicate that, notwithstanding the proliferating geopolitical uncertainties, the level of corporate divestment  activity may be maintained across the UK and Europe. The clear improvement in market sentiment post-pandemic was clear, with a significant number of respondents believing the easing of Covid-19 restrictions will likely stimulate the overall volume of non-core divestment activity. However, with the war in Ukraine, there remains a lot of uncertainty around whether increasingly distressed markets offer attractive opportunities for buyers.”

Full report summary:

• The record making number of deals in 2021 has given confidence that this trend could continue in 2022, particularly in the industrial sector.
  • 80% of the respondents believed that the number of European and UK corporates looking to sell non-core European and UK businesses in 2022 will increase YoY.
  • Over 75% of respondents perceived the most sales of these non-core businesses in the industrial sector.
• Respondents believe the overall volume of non-core divestment will continue to increase in 2022, especially in the UK. This is primarily perceived to be caused by the need to focus on core operations.
  • Over 56% of the respondents perceive an increase in non-core divestments.
  • Over 75% of the respondents perceived the need to refocus on core operations will drive European and UK corporates to sell non-core businesses in 2022.
  • A majority of the respondents (35%) believed the UK will see the most non-core divestment in 2022.
• There seems to be a strong perception that the amount of non-European corporates selling non-core European and UK businesses will not decrease in 2022, compared to 2021. Here it is perceived that non-European corporates will also be driven by the need to refocus on core operations.
  • Merely 2% of respondents perceived that the number of non-European corporates wanting to sell non-core European and UK businesses will decrease.
  • A majority of the respondents (53.7%) believed that the need to refocus on core operations will drive non-European corporates to sell non-core European and UK businesses in 2022.
• A majority of respondents (36.6%) predicted that corporates around the size of €1.0bn - €5.0bn were most likely to sell non-core businesses in 2022. Most respondents (82.9%) also predicted that the ability to execute is an important quality which corporates will look for in buyers of non-core businesses.
• Turnaround / special opportunities investors are expected to be the most active buyers for European non-core corporate divestments in 2022. Europe is expected to have the highest level of investment in non-core European and UK corporate divestments. The biggest barrier to the completion of these divestments is expected to be matching vendor’s value expectations.
  • 43.9% of the respondents perceived turnaround / special opportunities investors would be the most active buyers for European non-core divestments in 2022.
  • 97.6% of the responses believed that Europe would see the highest level of investments in non-core European and UK corporate divestments in 2022.
  • Most of the responses (46.3%) perceived that matching vendor’s value expectations will be the biggest barrier to successful divestments.
• Complexity and the lack of focus on core strategy is seen by a majority of respondents (80.5%) to affect the level of corporate divestments in 2022.
• The board of public companies should have an M&A strategy of both acquisitions and divestments.
  • 65.9% of the respondents strongly agreed that ‘For Public Companies, it is imperative for Boards to have an M&A strategy of both acquisitions and divestments.'
• ESG will play a central part in creating transaction values in 2022
  • About 85% of the respondents agreed or strongly agreed that 'ESG will have a greater impact on transaction valuations in 2022.'
• Tech-enabled business are resilient to geopolitical instability caused by the pandemic.
  • 75% of the respondents agree or strongly agreed that ‘the Covid-19 pandemic has proven the long-term value and resilience of tech-enabled businesses.'
• 2021’s record level of M&A activity will not adversely affect investor confidence in 2022
  • 42.5% of the respondents neither agree nor disagree and 40% of the respondents agree that ‘2021's record-breaking levels of M&A activity will improve investor confidence in making deals in 2022.'
• Activist investor pressure will be pivotal in driving UK and European corporate divestment in 2022
  • 43.9% of the respondents agree that ‘Activist investor pressure will drive UK and European corporate divestment activity in 2022.'
• Brexit will continue to be a catalysing factor in increasing the level of divestments of non-core UK businesses in 2021
  • 51.2% of the respondents agree that ‘Brexit will increase the level of divestments of non-core UK businesses in 2021.'
• It remains undetermined whether the number of corporate carve outs in 2022 will be adversely affected by the UK National Security and Investment Act.
  • 65.9% of the respondents neither agree nor disagree that ‘The UK National Security and Investment Act will reduce the number of corporate carve-outs in 2022.'
• It remains undetermined whether the fear of interest rate rises and inflation will drive more debt-funded deals.
  • 34.1% of the respondents agree, 31.7% of the respondents disagree, and 24.4% of the respondents neither agree nor disagree that ‘Fear of interest rate rises and inflation will drive more debt-funded deals.'

To download the full Corporate Carve-out Survey Results, please follow this link here.

AURELIUS Equity Opportunities Corporate Carve-Out Survey 2021

The sixth annual survey conducted by AURELIUS reveals that despite 61% of respondents predicting that increased complexity in the valuing of assets will be the biggest barrier to transacting (up from 38% in 2020), 89% expect the volume of corporate carve-outs to increase in 2021 (versus only 60% in 2020).

These findings align strongly to continued uncertainty, macro-economic conditions and mounting corporate debt which are complicating due diligence and business valuations. This contrasts to previous years, consecutively revealing the highest bidder¹ and ability to execute² would drive corporate carve-out activity, before the unprecedented volatility created by COVID-19.

Every year the AURELIUS European Corporate Carve-Out Survey canvasses corporate and advisory professionals to reveal year-on-year trends in the market and predictions of what lies ahead. This year’s survey was conducted between 12 January and 5 February 2021.

Key findings:

The COVID-19 pandemic will accelerate plans at UK and European corporates to divest of non-core businesses in 2021.

• 85% of respondents expect the impact of the COVID-19 pandemic will be to accelerate plans to divest non-core businesses.
• 85% of respondents also believe that the COVID-19 pandemic will increase the overall volume of non-core corporate divestment activity by European and UK corporates in 2021.

The vast majority of specialist advisors anticipate a frenetic year of corporate carve-out activity and non-core corporate divestment processes to be initiated by global groups.

• 89% of respondents expect the number of UK and European corporates seeking to sell non-core businesses to increase in 2021 vs 2020 (29% increase YOY).³
• 66% of respondents expect the number of corporates from outside Europe seeking to sell non-core European businesses to increase in 2021 vs 2020 (30% increase YOY).⁴

The increased complexity of valuation will be the biggest barrier to transacting corporate carve-outs, making the buyer’s ability to execute even more important.

• 61% of respondents predict complexity in the valuation of assets will be the biggest barrier to the completion of successful divestments (versus only 38% in 2020).
• 84% of respondents expect a buyer’s ability to execute an acquisition of a non-core asset will be the most important factor again this year for corporate sellers when choosing a buyer

Matthias Täubl, CEO of AURELIUS, said: “The collective insight of our investment and advisory network confirms that we are reaching a tipping point in the level of corporate divestment activity. COVID-19 continues to create uncertainty, despite the commencement of the vaccine roll-out, which will likely lead to an increase in and acceleration of deals, as corporates seek to shore up balance sheets and simplify their operations. The landscape is primed for special situations investors and there are strong carve-out and turnaround opportunities across Europe.”   

Tristan Nagler, UK Managing Director of AURELIUS, added: “These findings have highlighted clear trends in corporate divestments, with the disruption of COVID-19 set to increase activity in 2021. The survey confirms much of what we have long been seeing at AURELIUS, as European and global corporates look to rationalise their portfolios after a year of government support. As an experienced special situations investor with a strong track record in complex carve-outs, we clearly see this moment as an opportunity.”

Full report summary:

• The COVID-19 pandemic has shifted the paradigm and core imperatives of European and UK corporates in the sale of non-core businesses in 2021.
  Ranked in order of priority, the vast majority of respondents pointed to a need to refocus on core operations (92%), followed by a need for liquidity due to the pandemic (69%), and to reduce debt burden (38%).
• Record levels of corporate debt will spark a wave of non-core divestments in 2021, in part driven by the fallout of COVID-19.
  76% of respondents agreed or strongly agreed that “Record levels of UK and European corporate debt, in part driven by the Covid-19 pandemic, will drive UK and European corporates to divest non-core assets in 2021.”
• 68% of respondents also agreed or strongly agreed that “There will be increased divestment of non-core businesses by UK and European corporates based in the countries most affected by the Covid-19 pandemic economically.”
• For the third consecutive year, respondents predicted the two sectors that would see the most sales of non-core assets in 2021 would be Industrials and Retail. 
  Of the top two, more than three quarters of respondents identified Industrials, with only half selecting Retail as the sector likely to see the most carve-outs. 
  Other sectors ranked included in order of likelihood after the top two were: Consumer, Business services, Food and Beverage, Energy, TMT, Financial Services, Healthcare, Pharma and Life sciences, and Other.
• Survey respondents clearly expected the UK market to see the most corporate disposals of non-core assets in 2021, with the Brexit trade deal becoming an important driver. 
  72% of respondents agreed or strongly agreed that “Despite the Brexit trade deal, cross-border M&A will become more complex and difficult to execute with UK-EU divergence.” 
• Turnaround and special situations investors will be the most active buyers of non-core assets, backed by an ability to execute. 
  57% of respondents identified turnaround and special situations investors, versus only 26% traditional financial sponsors.⁵
  This could account for the 84% of respondents expecting a buyer’s ability to execute as critical for sellers when choosing a buyer.
• End of COVID-19 support from government will lead to the divestment of non-core businesses. 
  60% of respondents agreed or strongly agreed that the winding down of government support initiatives launched in response to the COVID-19 pandemic will contribute to the divestment trend of non-core business disposals by UK and European corporates. 
• Shareholder activism remains a key driver of corporate carve-out activity in Europe. 
  56% of respondents agreed or strongly agreed that shareholder activism will remain a key driver of corporate divestment activity (up from 49% in 2020). 

AURELIUS Equity Opportunities Corporate Carve-Out Survey 2020

Most important factor for corporate sellers of non-core assets is a buyer’s ability to execute the transaction

• 47% of respondents expect a buyer’s ability to execute the acquisition of a non-core asset to be the most important factor for corporate sellers when choosing a buyer. ¹
• 26% of respondents expect that the highest bidder to be the most important factor for corporate sellers when choosing a buyer. ²

Dirk Markus, CEO of AURELIUS, said: “While this trend was recognised before the outbreak of COVID-19 in Europe, the economic damage we will experience as a result of the virus only increases the importance of acquirers’ ability to execute transactions. Even in a benign deal-making environment, corporate carve-outs remain one of the most complex facets of the M&A market, with assets hard to diligence and the operational steps that need to be taken post-acquisition to ensure that assets can function as standalone businesses.” 

Tristan Nagler, UK Managing Director of AURELIUS, said: “In recent weeks, the pandemic has forced corporates to focus on safeguarding measures such as securing their balance sheets, accessing governmental relief and operational housekeeping. As isolation measures are eased, the economic damage on corporate liquidity and growth prospects will drive many to carve-out non-core businesses. This will likely result in the carve-out of high performing businesses as well as stressed and distressed assets. 

Motivated sellers need to be sure that buyers can execute these often-complex transactions, and particularly that buyers have the sophistication to understand the carve-out’s prospects in a post-pandemic world. In our view, the most likely buyers will be special situations investors who have operated through previous economic cycles and can prove they can master the complexities associated with these carve-out transactions.”

Full report summary:

The size of expected corporate sellers of non-core assets is predicted to increase from small-cap companies to large-cap companies

• A majority of respondents to the survey (34%) expected that companies with a market capitalisation of €1bn-€5bn would be the most likely sellers of non-core assets in 2020.
• This represents an increase of 29% year-on-year versus the findings of 2019’s survey. ³

Good governance named as driver for management teams reviewing their portfolios for the first time

• 72% of respondents to the survey either agree or strongly agree that good management will review portfolios of their assets and divest non-core assets in 2020 to practice good corporate governance.

Shareholder activism remains key driver of corporate carve-out activity in Europe

• 49% of respondents to the survey either agree or strongly agree that activist investor pressure will continue to encourage European corporate divestment activity in 2020 

Significant increase in the number of respondents expecting the DACH region to be one of the most active geographies for corporate disposals of non-core assets in 2020

• 67% of respondents to the survey expect the DACH region to be one of the top three regions for the disposal of non-core assets in 2020, compared with 45% of respondents in 2019.

Turn in the credit cycle not expected to have a negative impact on the number of corporate carve-out deals in Europe

• 46% of respondents to the survey expect the volume of divestments of non-core assets by corporates to stay the same in the event of a turn in the credit cycle 

For second consecutive year, the three sectors that respondents expected to the most sales of non-core assets in 2020 were Industrials, Retail and Business Services 

¹ In 2019, 7% of respondents predicted that ability to execute the transaction would be the most important factor for sellers of non-core assets when choosing a buyer.
² This was viewed as the most important factor in 2019’s survey, with 14% of respondents choosing this. In 2018, 30% of respondents chose this as the most important factor.
³ In 2019, 5% of respondents predicted the most likely sellers of non-core assets would be companies with a market capitalisation of €1bn-€5bn.

ENDS

Notes to Editor: 

ABOUT AURELIUS

AURELIUS Group is a pan-European investment group with offices in Munich, London, Stockholm, Madrid and Amsterdam. Since it was founded in 2006, AURELIUS has grown from a local turnaround investor to an international multi-asset manager.

AURELIUS Equity Opportunities SE & Co. KGaA (ISIN: DE000A0JK2A8, ticker symbol: AR4) is the listed entity within AURELIUS Group and focuses on investing in mid-market corporate carve-outs and platform build-ups in a broad range of industries. With a team of more than 80 in-house operations experts, AURELIUS actively supports its portfolio companies in their long-term development. AURELIUS Equity Opportunities currently has 23 portfolio companies located across Europe which employ around 13,000 people and generate annual revenues of approx. EUR 3.5 billion. The shares of AURELIUS Equity Opportunities are traded on all German stock exchanges. The company’s market capitalisation is approx. EUR 1.1 billion (as of December 2019).

AURELIUS Group also operates in the areas of growth capital, real estate opportunities and debt. AURELIUS Growth Capital invests in leveraged buyouts usually in succession or corporate spin-off situations. AURELIUS Real Estate Opportunities focuses on real estate investments, the value of which can be increased in the long-term by means of active management. AURELIUS Finance Company is an alternative direct lender, focused on providing flexible debt solutions to small and mid-market firms across Europe.

With its group charity AURELIUS Refugee Initiative e.V., AURELIUS provides comprehensive support for refugees on their way towards a better life.

To find out more, visit www.aureliusinvest.de.

CONTACT

Hawthorn Advisors

Henry Lerwill
Phone: +44 (0) 20 3745 4970
E-mail: 

Ryan Smith
Phone: +44 (0) 20 3745 3805
E-mail: 

To download the full Corporate Carve-out Survey Results, please follow this link here.

AURELIUS Equity Opportunities Corporate Carve-Out Survey 2019

The survey, which canvassed the opinions of AURELIUS’ corporate and advisory contacts on the volume and drivers of divestment activity of European non-core assets in 2019, indicated that the number of Asian buyers of these assets will be lower in 2019, compared to last year. In contrast, North American buyers of such assets are expected to be higher. 

Volume of corporates selling non-core European assets expected to increase in 2019 

• 64% of respondents expect the volume of corporates looking to divest of European assets to increase in 2019, the fourth year in a row such a prediction has been made. 

Dirk Markus, CEO of AURELIUS said: “It’s clear from the results of our survey that corporate carve-outs have become a prominent part of the M&A landscape in Europe. This is a real endorsement of the way in which firms are embracing divestment as a form of corporate best practice and a natural part of the business lifecycle. By continually reviewing their existing portfolios and carving out units that are underperforming or that no longer fit into their overall strategy, corporates can optimize their businesses and free up capital for investment into core growth areas.”  

Activist investors contributing to increase in European carve-out activity 

• 80% of survey respondents think activist investors are playing a bigger role in driving the disposal of European non-core assets. 
• The majority of participants (38%) identified weak financial performance of a corporate’s core business as the key driver behind the this increased activist intervention. 

Tristan Nagler, UK Managing Director of AURELIUS, commented: “Activist investors are more influential than they have ever been, as the level of capital being invested in and deployed by their strategies reaches an all-time high. Growing levels of business underperformance, prompted by a challenging macroeconomic backdrop, have acted as a trigger for activists, who are placing increasing pressure on management teams to deliver shareholder returns. In response, Boards are taking a more proactive approach to portfolio management, reviewing their strategy and business mix on an ongoing basis to identify and divest of non-core or underperforming assets. This enables them to strengthen their balance sheet and present a more compelling value story to investors. Unilever, Whitbread and Rolls Royce are just three examples of corporates that have been driven to sell non-core business units as a result of activist pressure in the last year.”

Volume of Asian acquisitions of non-core assets in Europe expected to fall 

• Only 3% of respondents expect Asian acquirers to be the most active buyers of non-core European assets, down from 22% of respondents in 2018. 
• Meanwhile, the percentage of respondents that expect North American acquirers to be the most active buyers of these assets increased from 8% in 2018 to 18% in 2019. 

Dirk Markus added: “The findings of our survey indicate a shift in the location of buyers looking to acquire non-core European assets, which in itself is reflective of wider developments and attitudes across the global investment landscape. Escalating political and economic friction between Europe and China, for example, has resulted in a rising protectionist agenda against Asian investment over the past two years, which has greatly impacted Eastern deal making on the continent. 

“In contrast, Europe is becoming an ever more attractive hunting ground for North American buyers, particularly as their own markets become increasingly competitive and expensive. Buoyed by economic prosperity at home, US and Canadian investors are continuing to seek out investment opportunities in Europe, where currency weaknesses in the Euro and Pound have contributed to the availability of high-quality assets at bargain prices.”   

Ends

Notes to Editors 

About the survey

In Q1 2019, AURELIUS distributed an online multiple-choice survey to a database of advisory and corporate contacts from across the UK, and continental European markets. The Group received responses from over c.100 people and the results have subsequently been reviewed and summarised in this report.

This survey represents the fourth of an annual review of the European corporate carve-out market by AURELIUS.

For more information, please contact:

Hawthorn Advisors

Victoria Ainsworth (0203 745 3815 / ) 

Caitlin Griffith (0203 745 3814 / )

To download the full Corporate Carve-out Survey Results, please follow this link here.

Aurelius Equity Opportunities Corporate Carve-Out Survey 2018

London, 4th June 2018 – An increase in corporate spin-out activity in Europe is predicted for the third year running, according to the findings of AURELIUS Equity Opportunities’ (“AURELIUS” or “the Group”) annual corporate carve-out survey. This is driven by the need to focus on core business operations, with turnaround and special situations investors expected to be the most likely buyers of divested assets. The industrials sector is projected to witness the most corporate carve-out activity.

Respondents to this year’s survey, which canvased the opinions of AURELIUS’ European corporate and advisory contacts, also predicted that the UK will see the most divestment activity, driven by continued uncertainty around the Brexit deal. The Financial Services sector is expected to feel the biggest direct impact of this.

Need to focus on core operations to drive upsurge in European asset divestment activity in 2018 

• The volume of corporates looking to spin-out European assets is predicted to be higher this year than last, according to nearly two thirds (65%) of survey participants, the third consecutive year such a prediction has been made.
• 63% identified the need to focus on core business areas as the biggest catalyst for divestment, followed by the need to free up capital (14%) and opportunistic/unsolicited approaches from potential buyers (9%).
• Nearly half (47%) of respondents predicted turnaround and special opportunity investors to be the most active buyers of European corporate carve-outs in 2018, followed by traditional financial sponsors (34%) and trade buyers (19%).

Dirk Markus, CEO of AURELIUS, said: “We have witnessed a steady increase in European corporate spin-outs in recent years and we anticipate this trend to persist in 2018 and 2019 as businesses face ongoing macroeconomic challenges, ranging from a rising protectionist agenda to European currency volatility and an ever-changing technology landscape.

Against this backdrop and amid mounting pressures caused by the rise in shareholder activism, there is a greater requirement for businesses to remain competitive through strategic portfolio management and a focus on growth in core business areas. This is often achieved via the sale of low growth or low potential assets which may be dragging down overall performance. In this way, a corporate can strengthen its balance sheet, refocus resources or free up capital for crucial investment into key operations.”

“A large proportion of these spin-outs require significant operational attention, often making turnaround firms, who have the required restructuring expertise, the most suitable buyers. That said, carve-outs – perceived by many as the niche domain of special situations or turnaround investors – are becoming more mainstream. For example, there has been a clear increase in interest for these assets from more conventional private equity investors, fueled by excess dry power which continues to drive competition for assets.”  

Industrials sector projected to witness the most activity

• 62% of respondents think the industrials sector will witness the most divestment activity in 2018, followed by the business services industry (27%).

Tristan Nagler, Managing Director of AURELIUS in the UK, said: “With a range of technological innovations transforming the industrials space – from robotics to 3D printing to blockchain – divestment in the sector is being largely driven by the need to free up capital for investment into innovation. That said, the industrials space is also witnessing a shift away from the diversified business model towards a more focused approach, resulting in a rise in the carve-out of non-core assets as businesses seek to achieve a more streamlined portfolio and growth strategy”. 

UK to see the highest levels of divestment activity; Financial Services sector to feel biggest impact of this

• The UK will see the highest level of corporate divestment activity in 2018 according to 61% of respondents, with half (50%) attributing this to the lack of clarity around the UK’s Brexit deal.
• Financial Services stood out as the sector likely to see the biggest direct impact of this uncertainty, according to 44% of corporate and advisory contacts. 

Markus notes: “Ongoing uncertainty around the future of the UK post-Brexit continues to put pressure on businesses, a trend unlikely to change in the immediate term. This may dampen appetite for further investment by international businesses into existing UK operations until a deal becomes clear. Possible consequences of this may include a material increase in divestment activity in three to five years’ time, as these operations start to underperform due to underfunding”.  

Nagler said: “With capital markets facing a lack of clarity over passporting rights and a number banks having already decided to move certain operations outside of the UK following the referendum, some are doubting the UK’s future status as Europe’s financial hub. This adds further pressure to a sector already experiencing unprecedented levels of corporate divestment activity, as businesses seek to react to the rising threat of digital disruption by freeing up capital to invest in technological advancements.” 

About the survey

In Q1 2018, AURELIUS distributed an online multiple-choice survey to a database of advisory and corporate contacts from across the UK, and continental European markets. The Group received responses from over 200people and the results have subsequently been reviewed and summarised in this report.

This survey represents the third of an annual review of the European corporate carve-out market by AURELIUS.

To download the full Corporate Carve-out Survey Results, please follow this link here.

Aurelius Equity Opportunities Corporate Carve-Out Survey 2017

This year’s survey canvassed the opinions of respondents from Aurelius’ network of UK and continental European advisory and corporate contacts on their expectations for corporate carve-out activity in the European market in 2017.

The key findings of the survey can be found here.

Aurelius Equity Opportunities Corporate Carve-Out Survey 2016

Aurelius canvassed the opinions of over 200 respondents from Aurelius Group’s network of UK and continental European advisory and corporate contacts on their outlook for European corporate divestments during the remainder of 2016.

The inaugural corporate carve-out survey found that despite uncertainties around the upcoming EU referendum, the outlook for the European corporate carve-out market is buoyant, as corporates continue to seek the benefits of streamlining their businesses, refocusing their strategies and freeing up capital through the disposal of non-core assets.

The survey also shows that the UK and Ireland are the two markets which can expect to see the highest volumes of corporate carve-out activity this year.

The key findings of the survey can be found here.