PE Firms Take Advantage as Large Corporates Shed Noncore Assets
August 29, 2013
Cost-cutting, productivity gains and an unwavering focus on the bottom line have become part of the “new normal” for businesses operating in the post-crisis era. These measures can only be taken so far, however. To that end, productivity gains have tapered in recent years and most companies have cut costs as far as possible without creating a detriment to the business. But there are still countless large corporations with bloated operations. A popular remedy to this problem has been for a corporation to sell a division of its noncore assets to private equity (PE) firms in carveout transactions.
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As can be seen, both the number and value of carveout transactions have been accelerating in the years since the financial crisis. And while the number of these deals declined slightly in 2012, it is primed to rebound in 2013. Furthermore, the amount of capital invested in these deals this year is already more than three-quarters of the total from all of 2012.