Module: Strategic management practices1. Analyse the effectiveness of defensive strategies for a company, using appropriate examples of your own. many M&A leaders were preparing for or considering a divestiture. Activist investors are often one of the biggest reasonsexecutives cite for recent divestitures, even though only 19 percent of our respondents indicate they had been subject toshareholder activism in the past two years. Given the impact of the COVID-19 crisis, this is likely to accelerate asorganizations plan to start returning to normal. End-to-end considerationsWhat course of action should sellers consider as the economy begins to adjust to a new normal defined by a pandemic?Depending on the severity of the crisis's financial impact, divesting non-core assets will be key to preserving andenhancing value in a defensive M&A playbook. Changes in the market and the competitive environment, as well as theneed to raise additional funds; have become key reasons for recent divestitures. Organizations in a crisis, or those thatcannot fix or sell an asset, should explore whether a managed exit of distressed assets can protect the remaining value.Sell-side activity is critical to build this type of advantaged portfolio. This includes being able to quickly identify assets thatwill be non-core in specific economic scenarios, as well as being prepared to execute at the right time. In the end,organizations may realize that the amount of investment required to grow a business and achieve market share would betoo much for them, and that the asset could thrive better under different ownership.A Look AheadThis year's Global Divestiture Survey captures distinct perspectives on recent divestiture activity before a transition point.A market disruption has materialized, and even though it has been long anticipated during an extended M&A boom, it hasarrived in a way no one could have expected. After executing their initial response, companies are recalibrating in an effortto recover and thrive. Corporate divestiture will undoubtedly play a critical role in defensive M&A response strategies andin building resilient portfolios for the "next normal." "Divestiture activities will have a strong influence in reshapingbusinesses for the 'next normal' conditions," said lain Macmillan, Deloitte's global M&A leader. "It's also inevitable that dealmaking will need to change to reflect these new realities. Especially now, corporate purpose that intertwines sustainabilitywith commercial success, resilience, and building trust across a wide coalition of stakeholders will need to be thecornerstone for future successful deal making." 2020 Global Divestiture Survey- A ReportPerspectives on sell-side activity and recent divestituresAfter years of surging growth in the global mergers and acquisitions market, the COVID-19 pandemic is forcing downwardspikes in both deal value and volume. However, even in the thick of record lows, corporate divestitures can be a strongdefensive tool for organizations looking to build portfolio resiliency heading into the next normal.High ceilings Low floorsThe end of the past decade marked a high point of optimism for mergers and acquisitions with global deal activity toppingthe US $3 trillion mark for the sixth consecutive year.1 Most sellers focused on divesting underperforming assets,refocusing portfolios on core growth areas, and increasing shareholder value through selective restructuring. Then theCOVID-19 pandemic changed the game. As economies around the world were disrupted and corporations were confrontedwith a sudden and dramatic shift in their markets, global deal value declined by 71 percent in June 2020. The number oftransactions decreased by about 8 percent year-over-year in most global markets. In April 2020, global M&A value haddropped to its lowest monthly value since August 2003. Now, corporate strategies have pivoted from responding to thesechanges toward efforts to recover and thrive in a different economy. Down cycles can present unique opportunities, andsell-side M&A can be an effective tool as companies look to reinvent themselves in these changed circumstances. Inmarkets where organic growth is weak and earnings, growth is derived largely from corporate restructuring, divestituresoffer an effective defensive M&A strategy to help preserve and enhance value. The COVID-19 pandemic has not made thechallenges of maximizing value from corporate divestitures easier. While many organizations are realizing anticipated valuefrom recent divestitures, most sales processes continue to be costly and protracted, service agreements can pose anongoing challenge post-transaction, and non-financial costs such as effects on morale, reputation, and customerperceptions can be considerable. How can successful sellers continue to navigate these challenges and avoid commonpitfalls in strategy and execution? In the beginning of 2020, Deloitte surveyed 100 global organizations with revenuesgreater than $500 million to understand their perspectives on sell-side activity and divestitures. The survey responsesreveal distinct perspectives on divestiture activity before a transition point. Even though disruption has been anticipatedduring an extended M&A boom, it arrived in a way no one could have expected with the spread of a global pandemic. Afterexecuting their initial response, companies are recalibrating in an effort to recover and thrive.Corporate Divestitures in the "next normal"Even before the COVID-19 outbreak, a decade of unprecedented growth in many markets had already raised concernamong many executives about a potential economic downturn. Sixty-six percent of respondents indicate these concernshad not changed their divestment strategy. For those that felt the need to adapt their plans, re-evaluating their currentportfolio to prepare for economically induced divestitures is most important. Our M&A Trends 2020 Survey report found 75percent of respondents expected to pursue divestitures in 2020-the second highest level in the past four years. ByFebruary 2020, as the COVID-19 pandemic spread, this outlook quickly moderated. Only about half of respondents to thissurvey say their organizations are going to attempt new divestitures.Many organizations may no longer have the luxury of choice. They may be forced to act. A Deloitte snap poll of 2,800 UScompanies in late April 2020 found executives will not only continue with M&A activity, but also in some cases evenaccelerate their plans. This sentiment was echoed in our second-quarter survey, "The Deal in Focus 2020," which found

Defensive methods have become crucial for businesses wanting to not only survive but also grow in…

Answered: Module: Strategic management practices…

Module: Strategic management practices 1. Analyse the effectiveness of defensive strategies for a company, using appropriate examples of your own.

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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