53% of respondents in E&Y survey mull divestments for various reasons
Author : DNA Money Correspondent
The financial crisis and subsequent slowdown in the economy have given enough reasons to the business community for divesting their assets to secure the future of their business. Various global corporate houses including Indian firms consider disinvestment for a range of factors such as acquisitions, strengthening balance sheets and debt repayment, reveals a recent global survey conducted by consultancy firm Ernst & Young (E&Y). The survey titled as 'Divesting in turbulent times: Achieving value in a buyer's market' says that out of 360 companies having more than $1 billion revenue, which include 40 Indian companies, 53% believe that they are likely to consider divestments for various reasons. While globally 56% of them cited focus on core business as major factor, 68% of Indian respondents mentioned this as the primary reason. Divestment for raising money was reasoned by 23%, while 21% wanted to dispose of non-performing assets. "Core business is now being defined more tightly, so anything that is not generating a level of cash or profit is frequently classified as 'non core'," notes Charles Honnywill from Ernst & Young's EMEIA sell side team.
Compared to global peers, Indian companies were quite high on confidence about having an appropriate transaction strategy - 29% Indians strongly agreed, compared to only 10% globally. A majority of Indian companies have said that they regularly examine their business portfolio and prefer strategically fit businesses in their portfolio. The survey also revealed a shift in buyers from domestic to overseas buyers. In fact, 25% of the global respondents anticipate that emerging markets will be major acquirers in the next two years.
"Companies in India too expect a major shift in the buyers in next 2 years. While in the last 2 years companies have sold their assets mostly to domestic buyers, in the coming two years, most strategic buyers are expected to come from overseas markets.