Majority of Southeast Asia firms plan divestment to reposition for growth: EY

A large proportion of companies in Asia Pacific say they are planning to divest to reposition for growth, according to the EY 2020 Global Corporate Divestment Study.

The annual study surveyed over 400 executives in the Asia Pacific (APAC) region, including close to 100 in Southeast Asia (SEA) in the period before and after the onset of the Covid– 19 outbreak.

The study found that some 79% of SEA executives and 75% of APAC executives have indicated that they are planning to divest within the next two years. The figures came in higher than the 70% and 74% registered just before the pandemic set in.

Some 53% of SEA executives and 56% of APAC executives also indicate that they are more likely to divest to fund investments in technology. This is an increase from the 37% of respondents (30% for APAC) before the Covid– 19 crisis.

“This study comes at a pivotal moment when business executives are facing unprecedent[ ed] disruption,” said Abhay Bangi, Asean sell and separate co–lead at EY.

“Sellers are also looking to fund new technology investments, especially digital enablers, as they reimagine their business models and prepare for the new normal,” he added.

According to EY, companies with more constrained access to capital markets due to the Covid–19 outbreak may need to turn to divestments. Over half of the respondents — 53% in SEA and 54% in APAC — say they will need to raise capital in response to the potential impact of Covid–19 on their businesses.

The respondents indicate that they are also reducing debt through divestments and reshaping their portfolio for a post– crisis world. Respondents also say they may also expect to see an increase in distressed divestitures over the next 12 months for companies that have been hard–hit by the pandemic. —

Felicia Tan