Private equity leverages corporations' non-strategic assets

Integral service around a transaction
BY : Diego GutiérrezSeptember Tue, 2013

Companies have focused their strategies on reducing costs, increasing productivity and improving net profit. But these strategies are bottoming out and companies are opting to slim down structures by selling off non-strategic assets to the private equity in order to generate cash. These slimming transactions seem to be picking up again in 2013, with three quarters of those produced in 2012.

CVC - Revlon: a profitable round-trip for both parties

According to pitchbook, CVC bought the Colomer group from Revlon in 2000 for 325M$. For more than a decade CVC has invested in the company, expanded its geographic scope and introduced a popular hairspray product line. With this growth, Revlon a month ago was willing to pay 660M$ more than double what it sold for. "This is an example of how non-strategic asset sales transactions can be advantageous for both sides of the transaction. While the private equity is able to dedicate resources to grow the subsidiary, the corporation obtains liquidity to focus on its more strategic business" comments Diego Gutiérrez, corporate finance expert at ABRA INVEST.

Dupont another example of a slimming conglomerate

Dupont with its more than 200-year history has become a growing giant with operations in industries ranging from agriculture and food and beverages to construction, healthcare, energy and mining. In the 2000s, DuPont began to refocus its business by selling off many of its ancillary divisions through slimming down transactions. Private equity firms rushed in to buy a number of assets: Sun Capital Partners took over the film business segment, Carlyle acquired the high-performance coatings business, and Blue Point Capital bought the commercial explosives business. In addition, KKR attempted to buy DuPont's protein technologies business in 2011 and the company is currently considering the sale of its chemicals unit.

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