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The flipside of the coin – to divest or not to divest, that’s the question

Date of news: 25 January 2023

2023 started off with a turbulent macroenvironment, clearly shown by the Composite leading indicator (CLI) compiled by the Organisation for Economic Co-operation and Development (OECD) (as can be seen here). This negative financial development of the stock market challenges firms to stay ahead. Accordingly, Emilie Feldman, Professor of Management at Wharton University, takes this as a sign that 2023 could be the year of divestitures. In such circumstances firms have to prioritize and “focus in on key resources and key areas of business that are central to their strategy” as she told in her interview to CNBC. For every divestiture, there are 3-4 acquisitions. The deliberate choice, often made by management, to acquire instead of divest may be driven by the macroeconomic environment (as we experience it right now). In other words, both acquisitions (as established by research) and divestitures (less established) may occur cyclical.

Within this setup, we are thrilled to announce the launch of our second project. Perceiving acquisitions and divestitures as joint activities we, Jonas Geisen joined by Rick Aalbers and Killian McCarthy, will address this relatively unchartered research area. Our focus: what was then is connected to what is now and influences what will be. In other words, we will zoom in on the cyclical nature of both acquisitions and divestments.

Focusing on the high-tech industries we will investigate longitudinal data to unravel their cyclical nature. Providing insights into how the strategic alignment of acquisitions and divestitures can look like, we hope to address both academics and professionals and change their perspective on corporate growth strategies.