Macroeconomic uncertainty, geopolitical instability and technological change are creating unprecedented business disruption. These dynamics, coupled with a low-growth environment, increasing shareholder pressure and changing consumer preferences, are prompting a critical decision: how best to allocate capital to gain competitive advantage. Nearly half of Canadian respondents (49%) plan to divest in the next 12 months.
The EY Global Corporate Divestment Study focuses on how companies should approach portfolio strategy, improve divestment execution and use divestments to future-proof their remaining business in these volatile times.
More Canadian companies are making strategic divestment decisions
The disciplined approach to divestment that Canadian companies began to take in 2016 following planned portfolio reviews continues to translate into fewer, opportunistic deals. A more strategic approach to capital allocation decisions remains a key priority.
Forty-four percent of Canadian companies selling assets describe their most recent divestment as opportunistic, down from 68% in 2018. And only 3% say an unsolicited approach by a buyer was the most important factor in their last divestment, down from 19% last year.
Larger deals dominate boardroom agenda
Just one year ago, no Canadian companies reported divestments over $250m, and only 19% reported those exceeding $100m. This dramatic shift to much larger divestments indicates Canadian companies are beginning to aggressively challenge the definition of what’s “core” to their business.