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5 Unexpected Deals Themes for 2012

3. "People may not be expecting corporate divestitures to continue."

In a year of corporate spin announcements, it may be hard for investors to imagine companies doing much more shrinking to grow share value next year. Krouskos of Ernst & Young says that by gauging corporate executives deal watchers should expect just the opposite in 2012 - a continued spin boom.

After a 12% increase in the aggregate value of divestitures so far in 2011, an October Ernst & Young survey shows that spins may only become more en vogue next year. Of the companies polled in the survey, 30% of U.S. companies expect to divest assets or business lines in the next twelve months.

In 2011, spin's to shareholders and divestitures of "non-core" assets have raised capital for some, while presenting growth opportunities for others. Energy giants like Sunoco (SUN), Valero (VLO), Marathon Oil (MRO) and Chesapeake Energy (CHK) have all announced programs to spin secondary assets and streamline their businesses.

With British oil major BP (BP) still holding billions in U.S. oil assets and a program to raise over $40 billion through asset sales - in addition to a consolidation of the U.S. shale industry -- there still may be plenty of energy deals yet to be cut in 2012.

Alternative energy may even emerge as a divestiture theme after a wave of late-2011 solar spins. In December, Warren Buffett's Berkshire Hathaway (BRK.A) entered the divestiture sweepstakes when its MidAmerican energy unit bought billion dollar -plus sized projects being built by First Solar (FSLR) adding to its alternative energy credentials. Meanwhile, KKR (KKR) and Google (GOOG) also teamed up to buy a solar project as well.

See Berkshire's largest 30 holdings.

Spins have also happened in industries like retail, technology and consumer goods, with a major impact to shareholders. Highlights include Sony's (SNY) purchase of a mobile phone joint venture with Ericsson (ERIC), Bank of America's (BAC) sale of Pizza Hut franchises, Citigroup's (C) EMI Music and publishing sale and Sara Lee's (SLE) coffee and hot beverage division sale to J.M. Smucker (SJM), among a host of deals.

"Companies are also divesting assets and spinoffs to free up cash in the future to execute deals. Businesses that are currently struggling to grow recognize the need to do transformative transactions," says Ernst & Young's vice chair of transaction advisory services Richard Jeanneret in announcing its 2012 M&A outlook.
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