Europe is seeing a rise in the number of corporate break-ups, spin-offs, demergers, and total break-ups, according David R Sadtler, a fellow of Ashridge Strategic Management Centre.
Corporate centres are being disbanded because European firms are now approaching business in an entirely new way, he said.
“Sell it or demerge it, that is what venture capitalists do,” Sadtler said.
He pointed to evidence that where the corporate centre is not adding value, the value of the business portfolio goes into decline. The business just becomes a passive investment, rather than one that is expanding in value.
He cited examples of ICI and Courtaulds where bids and shareholder intervention have led to parts of the business being sold off. He said that most of the demergers on this side of the Atlantic are linked to a bid, whereas in the US they are linked to low share price brought on by critical commentary from analysts.
“Firms are using different standards now,” he said. “They were asking whether the business has a promising future. Now they are saying: if the business has a good future, keep it; or if you can add value to it keep it, if not, sell it.”
He said businesses and shareholders have started to break themselves up, without paying out for advice from strategic advisers.
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