Value Creation in Deals — from Risk Minimization to Value Generation

Corporates as well as private equity firms are under more pressure than ever before when it comes to transactions. On the one hand, they have to generate positive returns; on the other, they have to contend with growing challenges. Fluctuations on the global stock markets lead to valuation uncertainties, and the economy is threatened by a downturn. Technologies are in flux and penetration into previously untested markets is up for discussion. In this challenging environment, the topic of value creation becomes all the more important.

In a 2019 study commissioned by PwC 1), 600 managers from various industries and regions were surveyed on value creation in the M&A environment. The majority of managers see an urgent need to question and adapt their own approaches to value creation. This applies to value creation approaches for both acquisitions and divestments.

Those companies that prioritize value creation at the outset of the transaction understand how to maximize enterprise value, according to this study. On the other hand, the result remains less successful for those companies that assume that an increase in value would generate itself by simply continuing the business. If value creation is neglected in the transaction process, value enhancement potential often remains untapped.