Private divestment

The sale of Elk Hills was the nation s largest public divestiture. In 1996, Congress decided that the properties no longer served the national defense purposes as envisioned in the early 1900s, and authorized steps towards divestment or privatization. 

The second real danger lies in exiting the acquired assets. Buyout firms are forced to sell portfolio companies at the end of the predefined limited lifetime of their funds. It is no secret that this has become more problematic in recent years and that the average retention time of assets has increased. In fact, relatively few have managed to successfully divest in the past few years and exiting portfolio companies is one of the top issues for private equity players operating in the chemical sector. 

There were more than 30 sizable private equity chemicals transactions in the USA and Europe between 1999 and 2004, with a total valuation of about EUR 40 billion. Twenty of these deals were in Europe, and the average deal size was greater here as well. Two of the ten largest European chemical LBOs were public-to-private cases, the remaining eight were divestments of conglomerates to financial sponsors (Fig. 31.2). 

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