ABB Chasing Higher Margins - Focuses on Core Business

Sammanfattning: In this paper the divestment of a business unit made by the Swedish-Swiss company ABB to the Japanese company Hitachi will be studied. The paper follows a case study methodology and aims to answer why ABB made this divestment as well as if the transaction was successful and at a fair price. Further, it contributes to learning about why firms are narrowing their business' focus. An important actor in this process was the Swedish activist investor Cevian Capital, who initiated this deal. The paper concludes that in the beginning of 2018, ABB was a company operating with the divisions Automation, Electrification and Robotics as their core business, why a divestment of their Power Grids operations allowed for a narrower business approach. Simultaneously, Hitachi wanted to internationalise and broaden its customer base. According to the calculations performed in the thesis, the valuation of Power Grids seems to be fair. The business was sold for 11 billion dollars whereas the report's valuation points somewhere in the range of 10 to 12 billion dollars. Overall, the transaction is considered to be successful according to stakeholders. The result was in line with previous literature which claims that industrial conglomerates need to narrow their scope.