Ernst & Young: Earnings season set to test confidence

By Rob Starr, Content Manager, Big4.com

The Ernst & Young Oceania Transactions Advisory Leader, Graeme Browning, says the next month of earnings reporting will be a key test of renewed market confidence and largely determine the level of deal activity for 2013.

Ernst & Young’s recent Global corporate divestment study , suggests more corporates are preparing to sell, with 36% of Australasian respondents saying they intend to do a sale in the next 12 months, and 51% in the next two years.

“That is a significant change in sentiment. So while we’re just starting to see companies prepare to sell, I think we will see a lot more activity as an improving outlook flows through to confidence to invest and transact,” says Browning.

The survey also found:

• 88% of Australasian respondents intend to accelerate their divestment strategy over the next two years.
• 50% of planned divestments by Australasian respondents expect deal size to be more than US$250 million, while 33% expect a deal size of US$50-$250m and 17% US$50m or less.
• 61% of Australasian respondents said when divesting assets in the past they had left it too late and with hindsight wished they had completed the sale earlier.

Ernst & Young’s divestment study found the top three reasons for Australasian companies selling an asset were: ability to secure an attractive price in the current market; need to release cash into the business, and; to focus on core business.