Divestments to soar 92pc, says Deloitte
DIVESTMENTS will rise to a value of £250bn throughout the world in 2012, Deloitte predicted yesterday, as companies spin off non core assets to bolster their balance sheets.
The total value of the spin-offs would represent a staggering 92 per cent rise from last year, when the total came to £130bn.
“Investor appetite for spin-offs is growing, often because major austerity measures have an adverse effect on companies’ plans for growth,” commented Ryan Mendy of investment adviser The Spinoff Report, which co-wrote the study.
Boards are being pressured by increasingly vocal shareholders, Mendy added, as investors demand “greater transparency and shareholder value”.
“Unless heavily incentivised, both institutional and private investors are more and more unwilling to aid traditional-style corporate restructurings [such as IPOs] on yet to be proven strategies,” he said.
“This is evidenced by the flurry of increased corporate spin-off activity in key sectors such as basic materials and consumer good sectors.”
Companies in Europe have rapidly spun off arms so far this year, with £10.5bn in divestments already.
And a further £131bn in spin-offs from corporations in Europe wait in the pipeline, the research claims.
In terms of sectors, nearly a quarter of divestments this year will be made by basic materials firms, dealing with metals, mining, minerals and resources, Deloitte said.
“This sector is active due to the cyclicality of fully valued businesses within the sector and the current high price of commodities,” it said.
And over a fifth, or 22 per cent, of activity will come in the consumer goods and services sector, according to the analysis of the pipeline.
“The current macro European squeeze on the retail and service sectors is pressuring companies to break-up some divisions, as management works to deliver shareholders’ long-term goals,” the report said.
“Companies are increasingly assessing their businesses and coming to the conclusion that with a little help from the parent entity, individual divisions can perform much more efficiently as standalone entities.”