Technology landscape and tax policy changes driving increase in UK divestments

19 March 2018

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  • 75% of companies say the changing technology landscape is directly influencing their divestment plans
  • 73% say that tax policy changes are a geopolitical driver in their plans to divest

The pace of technological change and tax reforms are the main factors driving UK corporate divestments according to the EY Global Corporate Divestment Study 2018, an annual survey of 1,000 executives worldwide.

Globally the proportion of respondents planning to complete a divestment in the next two years more than doubled compared to last year (43% to 87%), with the UK figure even higher (97%). Three-quarters of UK respondents (75%) said their divestments were directly influenced by the evolving technological landscape, up from 55% in 2017.

Charles Honnywill, EY’s UK & Ireland Divestment Advisory Services leader, comments:

“Corporates are reacting to the impact of technology and increasingly place it at the centre of their decision to divest and the way they prepare a business for sale. Digital disruption across all industries is also forcing businesses to re-evaluate their business portfolio. With data analytics enabling sellers to demonstrate potential value in a business, executives feel more comfortable than ever to act on a divestment, even if the business has been an under-performer within its sector.”

According to the survey, of the geopolitical risks affecting the decision to divest, tax policy changes (73%) are a critical driver. Charles continues: “Changes to corporate tax profiles as a result of policy shifts, such as the recent US tax reform that leads to reduced corporate tax rates, are likely to spark incentives to divest.

“Executives should evaluate the complex dynamics of new tax policies taking hold around the globe as part of their strategic divestment planning, rather than during or following the transaction.”

The survey also reveals that, despite divestments now being a strategic imperative, many corporate executives regret their timing. 63% of respondents said they held onto assets too long and 63% said they struggle to identify a team with the right analytical and technical skills to carry out portfolio reviews.

Charles concludes: “In this fast-moving, and often volatile, market, companies need a portfolio review process that gives them confidence to act earlier than ever. They need teams with the right skill mix — a blend of business knowledge, functional and analytics skills, including data management.

“This can not only help companies decide when to sell, but also presents the business in a favourable light for the most likely buyer.”

View the study online at ey.com/divest.

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