Tag: companies

How companies can use divestment to drive growth

EY Divestment

Some consider it counterintuitive, but divestment is becoming a strategic business move to drive growth — and it’s becoming part of many companies’ future plans.

In fact, 49% of companies plan to divest in the next two years, according to the Global Corporate Divestment Study from EY.

The findings are based on interviews with 900 global corporate C-suite executives and 100 private-equity executives, as well as external data from nearly a decade’s worth of divestments.

Getting smaller could help getting bigger

There is a consensus as to the motivation behind this strategy: Today’s companies are divesting most often as a first step toward reallocating capital toward areas of growth. They are selling off viable businesses because they no longer fall into the scope of their parent company’s future plans. And that same parent company might reinvest in R&D and new products, fund acquisitions, or areas better aligned with their core business strategy.

Companies with proceeds earmarked for use toward further acquisition are most likely to have a greater valuation post-sale.

GDS Global 84

Investors applaud divestments

While some companies may still see divestment as a sign of failure, the numbers say the opposite is true. Companies’ stock prices tend to grow at a greater pace after a divestment. Companies that are beating their index pre-sale tend to outperform their index by an even greater rate post-sale and, while divestment is not a quick fix for underperformers, even their stock price grows at a greater rate post-sale.

Companies also tend to experience exponentially better stock price growth when they make larger divestments. For example, those that divest 20% of their business fare far better in the market than those that divest just 5%.

Investors are often encouraged by transformational transactions that communicate a company’s focus on areas of strength and future growth prospects.

Know your portfolio well … or else

The last thing companies want is for a third party — a  competitor, a shareholder activist, or potential buyer — to uncover something about the company that its leadership didn’t know because they hadn’t fully considered all potential sources of available data. Or because they hadn’t acted on their findings quickly enough.

The digital revolution, big data, and activist investors affect all companies’ business models. So companies need access to good data. They need to be able to take a deep dive into each business unit’s financials, set benchmarks like an external investor would do, and stress-test the data. And they need to do it faster than an outsider.

Shareholder activists tend to get involved when companies don’t appreciate the value in its portfolio of businesses and are slow to act. Divestments are the second-biggest change that activists are pushing for — and this is growing every year. Companies that fail to act on findings often face harsh consequences. Yet, more than half (53%) of executives interviewed say their businesses held on to assets even after they knew they should divest.

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Divestment as a forward-thinking strategy

For many companies, divestment is a way to support more robust company growth. Experienced CEOs know there is marked efficacy resulting from bold, well-informed, and timely divestments. This is particularly the case while new technologies, a strong US dollar, declines in oil prices, and global economic policy decisions continue to challenge growth. 

Written by Paul Hammes, EY global divestiture advisory services leader.

Click here to read the Global Corporate Divestment Study.

This post is sponsored by EY.

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14 difficult questions companies like Google and SpaceX have asked job candidates during an interview

hot cocoa

If you think interview questions like “What’s your biggest strength?” and “Where do you see yourself in five years?” are tough, you’re in for a rude awakening. 

Some companies are asking far more challenging — an in many cases, oddball — questions of job candidates, like “How many basketballs would fit in this room?” and “How would you sell hot chocolate in Florida?”

Job site Glassdoor recently combed through its tens of thousands of interview questions shared by job candidates during the past year to find some of the most difficult and bizarre questions. 

“Job candidates at employers across all industries should be ready to answer any question, from the most basic to the most challenging,” says Susan Underwood, Glassdoor’s head of global recruiting and talent acquisition. “Employers are asking tough interview questions to test a job candidate’s critical thinking skills, see how they problem solve on the spot, and gauge how they approach difficult situations. Employers want to determine how different candidates respond to challenges, and those who respond well may have the edge when it comes to receiving a job offer.”

Interestingly, Glassdoor found that there is a statistical link between a tough interview process and greater employee satisfaction. Across six countries, more challenging interviews upfront were associated with higher employee satisfaction later on. 

Here are some of the strangest and most challenging questions companies are asking job candidates right now, according to Glassdoor:

SEE ALSO: The favorite job interview questions of Elon Musk, Richard Branson, and 26 other highly successful executives

‘When a hot dog expands, in which direction does it split and why?’ —SpaceX Propulsion Structural Analyst job candidate

‘Would you rather fight one horse-sized duck, or 100 duck-sized horses?’ —Whole Foods Market Meat Cutter job candidate

‘If you’re the CEO, what are the first three things you check about the business when you wake up?’ —Dropbox Rotation Program job candidate

See the rest of the story at Business Insider

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