Divestments are a strategic imperative for senior corporate executives in every sector and an EY survey found that 87 per cent of companies plan to divest within the next two years. According to Paul Hammes, EY's global divestment leader, digital transformation is one of the biggest influences on the C-suite in 2018, both in terms of capital strategy and operating model decisions. In the introduction to EY's Global Corporate Divestment Study, he writes that digital transformation, which comes with shifts in consumer behaviour and sector convergence, is pushing a growing number of companies to divest assets in order to fund digital growth strategies. He writes “those that understand how evolving technology will affect their business over the next 12 months, are three times more likely to achieve an above-expectation valuation multiple on their remaining business post-divestment.”
The survey found that:
- 74 per cent say the changing technology landscape is directly influencing their divestment plans;
- 80 per cent say tax policy changes are a geopolitical driver in their plans to divest;
- 56 per cent say they held onto assets too long when they should have divested;
- 64 per cent struggle to identify a team with the right analytics and technical skills to drive portfolio reviews;
- 60 per cent continued to create value in a business they planned to divest; and
- 42 per cent say not presenting the business as stand-alone “scared off” buyers or prompted lower bids.
Hammes commented: “More than ever, corporate executives are looking in the mirror to understand what’s holding their organizations back from being more competitive. Urgency has arisen among these executives who see technology altering the competitive plane and recognizing their organization needs to adapt quickly. With access to new analytic technology that optimizes value and lowers risk, executives feel more comfortable than ever to act on a divestment."
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