Finance Case Study
Case: GLIC Insurance Corporation decides to divest one of its business units.
Considering the given case, we have decided to divest the All-World GLIC business unit to Aviva Life Insurance Company. Aviva is a leading insurance company in Asia which has 43million customers across 21 countries and operates in only savings, general and health insurance, and fund management products and services. Aviva focuses on growing their business profitably and improving their operational efficiency so that they can benefit as major markets return to economic growth, i.e., by also segmenting to the life insurance sector.
Our main objective is to identify a potential partner for a profit, providing the owners with growth potential and an eventual exit strategy and in turn mainly to raise capital of $6billion.
Our Process: Led by a senior advisor, Acquisition Services undertook the following initiatives:
* Worked with the owners to understand their rationale for selling the business unit and structure an appropriate exit strategy * Assisted in writing a Confidential Informational Memorandum (CIM) including an operating model to be used by prospective buyers * Utilized our firm’s industry contacts and proprietary database to create a marketing process designed to maximize value for the client which included highlighting the property in both our email and hard copy newsletter on a confidential basis * Identified potential buyers and presented them to the company for review * Led due diligence meetings for the client with a select group of prospective buyers * Worked with both the client and prospective buyers in developing valuation models, return on equity scenarios and due diligence * Analyzed the proposals with the client to assist them in assessing the best offer from multiple perspectives * Assisted in negotiating the final terms of the transaction resulting in a near doubling of the initial offers
Reasons for GLIC to divest:
1. Divest to Obtain Funds/ Raise capital
2. Focusing on Primary Business
3. Availability of Other Investment Opportunities
4. Inability to Achieve Synergy or Strategic Fit
5. Social or Political Reasons
We have advised GLIC, AVIVA as the most suitable company to divest All-World GLIC because of certain factors of AVIVA in relation with its strategic plan.
In 2010, they assessed their strategic direction against the backdrop of the changes and came away with three principal conclusions:
* Increasing geographic focus
They will focus on markets where they have strength and scale. In determining their focus, they will judge markets on their potential to generate both US$100 million of adjusted operating profits and a 12% return on capital employed, or US$1 billion of franchise value for younger businesses.
* Benefiting from the combination of life and general insurance Their life and general insurance operations are excellent businesses in their own right, but in addition to their inherent strengths there are significant advantages to running these businesses under one brand and in one group, supported by Aviva Investors.
* Building on their core strengths
To be the best in both life and general insurance, we will focus on our four core strengths of marketing and distribution, financial discipline, technical excellence and operational effectiveness, benefiting from a powerful brand and growing customer franchise....
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