Divestiture processes. The case of Magneti Marelli' sell-off from FCA

Abstract

In the current market overview, especially in the automotive industry, the drivers which lead to a successful returns for an organization in terms of value creation are difficult to achieve and they are changing continuously. The European macroeconomic agents show an extremely low growth which started during the American subprime crisis in 2007 and never re-established. The European Central Bank (ECB), implemented massive reforms to reactivate the economy in Europe; the most famous and well-known manoeuvre, quantitative easing (QE), helped the European continent, injecting liquidity on the market based by the acquisitions from the central bank of government bonds or other financial assets but even these operations have not been sufficient enough. Nowadays the interest rate are the lowest ever seen in the market but the growth still not achieving the levels pre-fixed neither the inflation rate which should be around 3%, based by the European parameters but which it is expected to be 1.1% in July 2019 . This research wants to explain how a successful divestiture process should be implemented and which of the three methods between: sell-off, spin-off or equity carve out should be the best solution for the organization. At the same time it will be analyzed a business case related to the divestiture topic concerning the sell-off from FCA of its business unit Magneti Marelli; entity which is committed to the design and the production of hi-tech systems and components for the automotive sector. They will be illustrated the financial statements of the target company and explained the outputs by the ratios computed through the KPIs. Furthermore, it will be express the sell-off deal and the mass media opinions related to the divestiture process. Based by the FCA share price, it will be determined the investor perceptions related to the Magneti Marelli sale both in the short and medium term. Finally a critical analysis of the Magneti Marelli's valuation price to conclude if Magneti Marelli divestiture has been a successful divestiture process related to the academic considerations.