Deloitte Survey: Two-Thirds of Companies Pursue Carve-Outs or Divestitures, Despite...

Deloitte Survey: Two-Thirds of Companies Pursue Carve-Outs or Divestitures,
Despite Recession

According to Survey, Strategic Buyers Show Greatest Interest, Offer Highest
Valuations and Complete Majority of Carve-Outs

NEW YORK, March 24 /PRNewswire/ -- Two-thirds (64 percent) of executives said
their companies are still pursuing carve-outs, or divestitures, despite the
economy and the credit environment, according to a recent Deloitte survey of
100 executives.

Respondents indicated the most important rationales for carve-outs were that
an asset was not considered core to the business strategy (66 percent) or the
company needed cash and capital (50 percent).

"In light of a challenging economic environment, carve-outs remain an
important means for companies to focus business strategies and strengthen
balance sheets. The recession has pushed more firms into financial situations
where they may be looking to divest operations to raise additional capital.
Although companies might prefer to wait until market conditions improve, many
don't have that luxury," said Bob Coury, national managing director of
Deloitte Corporate Finance LLC. "When companies need to divest operations
quickly, they typically trade premium valuations for the certainty of getting
a deal done."

In discussing prices sought for divested assets, 83 percent of survey
respondents indicated that strategic buyers typically offer the highest
valuations.

"The broad consensus among the executives surveyed is that strategic buyers --
both domestic and foreign -- show the greatest interest, offer the highest
valuations and complete a majority of carve-out transactions," Coury said.
"Driving this disparity is the fact that strategic buyers don't always face
the same challenges encountered by financial buyers. While it can often be
easier for strategic buyers to integrate carve-outs into their existing
infrastructure, financial buyers may lack the appropriate operational
infrastructure, management teams and industry experience making integrations
more challenging. As a result, financial buyers often offer lower bids to
account for significant investments needed on the back-end of a carve-out
acquisition."

Of the executives surveyed, 40 percent had attempted a carve-out they were
unable to complete in the past three years. For those reporting incomplete
divestitures, 39 percent said that they would attempt to divest the same asset
again in the next three years.

"Initial carve-out attempts are not always successful. Quite often, sellers
move hastily, without researching the market or -- more importantly --
properly preparing the asset for a sale," said Andrew Wilson, national
managing partner, Divestiture Services, Deloitte & Touche LLP. "Lack of
thorough preparation can cause sellers to develop unrealistic value
expectations based on limited financial and market data. This typically
results in the delay of a transaction, a sale at a reduced valuation or an
unsuccessful carve-out divestiture."

According to the survey, the most common reasons for not completing a
carve-out divestiture were: sellers were unable to obtain the price sought
(67 percent); buyers came back with new, reduced terms (38 percent); sellers
could not find a buyer (33 percent); and, buyers were unable to secure funding
(32 percent).

To review the full survey results, visit
www.investmentbanking.deloitte.com/divestiture

About the Survey

Deloitte contracted Bayer Consulting to conduct a survey of 100 U.S.
executives. The survey was conducted online from June 5 through October 31,
2008.

The survey defined a carve-out or divestiture as the sale of a subsidiary or a
portion of a company's business, which could include a plant, other facility,
product line, business unit or division.

Respondents worked in organizations with annual revenues ranging from less
than $100 million (41 percent) to $1 billion to less than $5 billion (17
percent) and $5 billion to less than $25 billion (23 percent) to $25 billion
or more (20 percent). Respondents predominantly represented the manufacturing
(50 percent) and financial services (22 percent) industries.

About Deloitte

As used in this document, "Deloitte" means Deloitte Corporate Finance LLC,
Deloitte Financial Advisory Services LLP, Deloitte & Touche LLP and Deloitte
Services LP, separate subsidiaries of Deloitte LLP. Please see
www.deloitte.com/us/about for a detailed description of the legal structure of
Deloitte LLP and its subsidiaries.

SOURCE Deloitte

Lauren Mistretta, Public Relations, Deloitte, +1-312-486-4259,
lmistretta@deloitte.com; or Shelley Pfaendler, Vice President of KCSA
Strategic Communications, +1-212-896-1248, spfaendler@kcsa.com