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Divestment to Rise to 250 Billion Pounds in 2012
Tuesday, February 21, 2012
New York: Divestment activity is set to reach to a value of 250 billion pound ($397 billion) across the world in 2012, a staggering 92 percent jump from last year, as companies plans to spin off non-core assets to boost their balance sheets, says a report.
According to a study titled 'The Spinoff Report' by Deloitte, "the global value of corporate spinoff, where a division of a company becomes an independently listed business is set to increase to 250 billion pound in 2012, an increase of 92 percent from 130 billion pound in 2011."
"Investor appetite for spin-offs is growing, often because major austerity measures have an adverse effect on companies' plans for growth," Ryan Mendy, Chief Operating Officer, at The Spinoff Report noted.
Management boards across all markets and capitalisations are seeing their outlooks and strategies being challenged by increasingly vocal investors seeking "greater transparency and shareholder value."
"Unless heavily incentivised, both institutional and private investors are more and more unwilling to aid traditional-style corporate restructurings (IPOs, etc.) on yet to be proven strategies. This is evidenced by the flurry of increased corporate spinoff activity in key sectors such as basic materials and consumer good sectors," Mendy added.
European companies have so far announced spinoffs worth 10.5 billion pound for 2012. In addition, a further 131 billion pound in spin-offs from corporations in Europe wait in the pipeline.
In terms of sectors, nearly a quarter (24 percent) 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.
Further, 22 percent of divestment activity will come in the consumer goods and services sector, the report said.
"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," it added.
Source: PTI
According to a study titled 'The Spinoff Report' by Deloitte, "the global value of corporate spinoff, where a division of a company becomes an independently listed business is set to increase to 250 billion pound in 2012, an increase of 92 percent from 130 billion pound in 2011."
"Investor appetite for spin-offs is growing, often because major austerity measures have an adverse effect on companies' plans for growth," Ryan Mendy, Chief Operating Officer, at The Spinoff Report noted.
Management boards across all markets and capitalisations are seeing their outlooks and strategies being challenged by increasingly vocal investors seeking "greater transparency and shareholder value."
"Unless heavily incentivised, both institutional and private investors are more and more unwilling to aid traditional-style corporate restructurings (IPOs, etc.) on yet to be proven strategies. This is evidenced by the flurry of increased corporate spinoff activity in key sectors such as basic materials and consumer good sectors," Mendy added.
European companies have so far announced spinoffs worth 10.5 billion pound for 2012. In addition, a further 131 billion pound in spin-offs from corporations in Europe wait in the pipeline.
In terms of sectors, nearly a quarter (24 percent) 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.
Further, 22 percent of divestment activity will come in the consumer goods and services sector, the report said.
"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," it added.
Source: PTI
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