Companies that made big acquisitions during a boom period are now selling assets at significantly lower prices, according to recent deals announced by Alibaba Group and BlackBerry Ltd. Alibaba is selling Chinese department-store chain Intime for $1 billion, which is around 30% of its valuation when it was acquired in 2017. Meanwhile, BlackBerry is divesting its endpoint security unit Cylance for $160 million.
These moves reflect a shift in the market as companies reassess their strategies and cut losses. Analysts say overpayment was inevitable during an era of intense competition and high valuations, but now companies are taking a more sober approach. “Years of zero interest rates and pandemic-fueled deal hysteria sent valuations soaring in hype sectors,” said Oliver Scharping, a portfolio manager at Berenberg.
The divestments allow the companies to refocus on their core operations and take advantage of a resurgent M&A market. Alibaba is working to revive its Chinese e-commerce division, while BlackBerry is trying to turn around the business by expanding into new areas such as Internet of Things and secure communications platforms. The recent deals are part of a broader trend, with M&A volumes rising 16% this year to $3.2 trillion, according to data compiled by Bloomberg.
Source: https://finance.yahoo.com/news/companies-spent-billions-m-now-050000804.html