Navigating Carve-outs amidst high interest rates and geopolitical tensions: Insights from the AURELIUS Corporate Carve-out Survey 2024

In recent years, the global corporate carve-out landscape has undergone profound shifts, driven by high interest rates and geopolitical tensions. The annual AURELIUS Corporate Carve-out survey examines these overarching dynamics, offering insights into current levels of carve-out activity around the world.

Reducing Complexity

This year’s survey found that, in an increasingly complex world, growing numbers of corporates are now trying to reduce complexity by carving out and selling non-core entities, with 66% of those surveyed identifying this as likely to be a key driver behind divestment activities in 2024.

81% of respondents also said that the need to refocus on their core operations would drive them to sell non-core assets in 2024, while a further 52% cited the need to reduce their debt burden as an additional factor in this regard.

Supply Chain Concerns

By contrast, the survey revealed quite a limited emphasis on supply chain issues as a reason for global corporates to sell non-core businesses. Only 9% of respondents identified supply chain issues as a driving factor, suggesting that the widely reported influence of ongoing conflicts in regions like Ukraine, the Gulf, and the South China Sea on exit volumes may have been overstated.

ESG Considerations in M&A

Likewise, ESG considerations were seen by the majority of respondents as being only a marginal influence on M&A activity. This may reflect waning interest from some investors amid a general sense that momentum behind sustainable finance funds has flagged in recent months.

Unlocking Value-Creation Opportunities

These findings underscore the extent to which operational improvements have become the last remaining value creation driver. They demonstrate that growing numbers of corporates are now seeking to refocus their strategies and achieve greater efficiency in response to market turbulence, creating a significant opportunity for investors like @AURELIUS that are well positioned to unlock value-creation opportunities through an uncompromising focus on operational improvements.

Conclusion

This year’s Corporate Carve-out Survey offers insights into the evolving dynamics of carve-outs amidst high interest rates and geopolitical tensions. By understanding these trends and embracing a hands-on approach to asset management, PE firms can position themselves to effectively seize emerging opportunities and drive sustainable value creation.