European firms to up number of divestments as they look to protect against uncertainty

 
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The industrial sector is expected to be the most poised for divestments (Source: Getty)

Companies around Europe are expected to offload more of their side operations in the face of big sources of economic uncertainty, a survey of corporate advisers has revealed.

More than half of the British and European advisory and corporate professionals polled believe the volume of businesses looking to divest European assets will rise this year compared to 2016, according to Aurelius Group.

Firms can also carve out parts of their operations to free up capital or to stem exposure to vulnerable sectors, but the main driver of increasing divestment activity, cited by almost two-thirds of respondents, will be the need to refocus on core operations in part as the Brexit process changes the shape of European cross-border business.

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A third of respondents said they expect the UK to be the foremost region for corporate divestments as domestic firms streamline their businesses. Foreign firms could also divest UK operations as they look to avoid exposure after Brexit, the poll found.

The relative health of the European economy in recent months could prove too tempting for company executives looking to refocus ahead of the possibility of renewed political uncertainty in Italy and Germany.

“We have certainly seen a pick-up in corporate carve-out activity across the European market since last summer,” said Dirk Markus, chief executive of Aurelius Group.

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“A carve-out, where a firm seeks to rationalise its business by selling a non-core or potentially underperforming asset, can be hugely beneficial to a corporate, allowing it to refocus on key operations, free up capital and rid its balance sheet of a loss-making entity.”

When asked to identify which sectors were expected to experience the highest volume of divestments, almost a third of respondents identified industrials as most likely to be reviewing operations. Some eight per cent said financial services firms were most likely to divest.

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