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Global Corporate Divestment Study 2018 Canadian findings
Active portfolio reviews are moving divestments up Canadian companies' corporate agendas, according to the EY Global Corporate Divestment Study 2018.
Last year, the majority (73%) of Canadian executives surveyed indicated plans to conduct more regular portfolio reviews. We’re now seeing the result of those reviews reflected in a greater number of divestments expected in the next 12 months. In fact, survey results show the vast majority (84%) of Canadian executives expect to divest in the next 12 months — compared to 72% globally — and that number jumps to 95% over the next two years.
More Canadian companies are starting to consider divestments of non-core assets. Not only are more Canadian companies considering a divestment, nearly a quarter (24%) of respondents say they have divested of more than two businesses in the last three years.
Preparation is key to maximizing value. The majority (68%) of respondents pointed to lack of preparation in dealing with tax risk, and 57% noted that a lack of fully developed diligence materials contributed to value erosion in their last divestment.
Technology is a growing theme in and outside of deals. Survey results show more companies are leveraging digital advances to drive value in the divestment process and beyond. Nearly half (41%) of Canadian executives plan to reinvest funds from a divestment into technology.
Key global sectors show strong appetite to divest. A large majority (87%) of both oil and gas and financial services respondents are considering a divestment over the next two years. In oil and gas, 73% say that the changing technology landscape is influencing their plans. Meanwhile, the majority of financial services companies are looking at innovative opportunities for cost savings, including carve-outs of back- and middle-office assets (69%) and transferring employees to a third party and contracting them back as needed (67%).