Companies in the Asia-Pacific region are keeping a closer eye on their portfolios than before amid growing pressure to evaluate underperforming assets, divest non-core businesses and make ‘greener’ investments, a recent Deloitte survey found.
The research finds that geopolitical tensions and discord in global supply chains are forcing managers to act quickly and withdraw from or collaborate with partners that can create value.
“The forces reshaping the global economy are having a major impact on businesses in Asia Pacific,” said Jiak See Ng, Deloitte Asia Pacific’s strategy, risk and transactions leader. “Whether it’s geopolitical tensions, sustainability imperatives or investor pressure, businesses need to be proactive in rebalancing their portfolios to remain competitive and ready for divestment,” she added.
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The survey was conducted among 250 executives in the region from private and public companies managing portfolios of at least US$1 billion.
Nearly 60 percent of companies surveyed review their portfolio performance at least twice a year, up from 46 percent in 2022. Meanwhile, 79 percent of executives said they expected to make two or more divestments in the next 18 months.
Nearly all executives surveyed have refrained from selling in the past 12 to 18 months, with 99 percent of respondents considering at least one alternative exit strategy compared to the conventional practice of a direct sale.
More than half of survey respondents said environmental, social and governance (ESG) considerations were a hot topic during their most recent divestment. ESG factors are now central to companies’ strategic decision-making and reallocation of activities.
“In an era of exponential technology and increased focus on ESG, active portfolio management will be one of the keys to success for companies,” said David Hill, CEO of Deloitte Asia-Pacific.
The research found that sellers with a clear ESG story were six times more likely to achieve higher deal value than expected.
According to Hill, there will likely be an increase in acquisitions, driven in part by record levels of dry powder. Mergers and acquisitions will also allow companies to acquire advanced technologies and accelerate their decarbonization paths, he said.
Global private equity dry powder rose to an unprecedented $2.59 trillion as of Dec. 1 last year, up 8 percent from the $2.39 trillion total in December 2022, according to data from S&P Global and Preqin.
This article originally appeared in the South China Morning Post (SCMP)the most authoritative voice covering China and Asia for over a century. For more SCMP stories, explore the SCMP app or visit the SCMP’s Facebook And Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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