Over half of global executives would consider the sale of their entire business, findings from EY’s 2014 Global Corporate Divestment Survey finds.
The research, which questioned 700 corporate executives, reveals that some 33 per cent of businesses are planning a sale over the coming two years.
At a time that EY notes increased merger and acquisition activity, some 55 per cent of those interviewed admit that a full sale of the company would be an option. Meanwhile, 34 per cent would prefer a carve out and 14 per cent an initial public offering (IPO).
Pip McCrostie, EY global vice chair transaction advisory services, says that divestments are now a ‘fundamental part’ of business strategy.
‘Selling is becoming as great a focus for many CEOs as buying, with strategic divestments and capital redeployment offering a route to value and growth.
‘The pace of innovation, changing patterns and the return of modest growth to the global economy – means business leaders will need to more regularly re-assess their portfolio and strategic goals to maximise their growth.’
McCrostie adds that while selling is often viewed as contributing to a short-term dip in the top line, it can often actually lead to long-term growth due to capital redeployment.
More on EY surveys:
EY predicts that higher prices will be needed to secure highly-valued assets, and also finds that 20 per cent would not sell a valued asset at any price.
Life sciences may be the most active divesting sector in the coming years, EY says, with 41 per cent expecting to sell. For consumer products, the main motivating factor for divestments is found to be off-trend products, followed by reduced emend or market share.
Technology executives cite big data and analytics developments as contributing factors to selling.
Charles Honnywill, UK&I divestment leader at EY, adds, ‘After five years of depressed M&A activity we may now see a modest improvement in the global deal economy as companies move from a ‘mend and extend’ approach to ‘spend’.
‘A consistent rather than patchy improvement in the global macro-economic picture is providing the foundation for greater investor confidence.’
