February 12, 2019 / 1:47 AM / a year ago

Global firms plan more divestments as shareholder pressure mounts: EY

FILE PHOTO: A street sign, Wall Street, is seen outside New York Stock Exchange (NYSE) in New York City, New York, U.S., January 3, 2019. REUTERS/Shannon Stapleton/File Photo

(Reuters) - Global corporate executives continue to see the sale of business units as a key response to pressures from shareholders eager to maximize returns on their investment and changing technology, according to Ernst & Young (EY).

Those planning to divest a certain aspect of their firm in the next two years stood at 84 percent, almost double the level the accountancy firm recorded in its 2017 divestment survey and fractionally below the record-high figure from last year. (go.ey.com/2TFDVYk)

Such behavior highlights how companies are seeking to ensure that business models are focused on core competencies and unnecessary costs are stripped out to bolster profitability at a time when forecasts for global economic growth are deteriorating.

Such considerations are important when even traditionally passive investors are joining activist names in pushing companies to perform better.

The scale of potential divestments is also escalating, with 70 percent of executives polled saying the potential sale would be “large-scale”, up from 50 percent in 2018.

However, the level of companies choosing to offload units because they are performing poorly against their competitors fell to 69 percent from 85 percent last year.

Reporting by David French in New York; Editing by Lisa Shumaker

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