Ability to execute complex transactions crucial for acquirers of carve-out assets in 2020, says Aurelius survey

A buyer’s ability to execute complex carve-out transactions is predicted to be the most important factor for corporate sellers of non-core assets, according to the findings of Aurelius Equity Opportunities’ (Aurelius) Annual Corporate Carve-out Survey. 

This finding, which has been amplified by the uncertain macro-environment caused by the Covid-19 crisis, contrasts with previous years, where the most important factor consistently chosen by respondents was securing the highest price.

The survey’s respondents, which consists of Aurelius’ corporate and advisory contacts across Europe, were canvassed for their opinions on the volume and drivers of divestment activity in Europe in 2020. 

Forty seven per cent  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, while 26 per cent of respondents expect that the highest bidder to be the most important factor for corporate sellers when choosing a buyer.
Dirk Markus, CEO of Aurelius, says: “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, says: “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.”