portfolio-formal-review

The leading item on boardroom agendas this year is portfolio transformation.

Read: Increasing number of Canadian institutions using ETFs

Nearly one-third of Canadian business executives have increased the frequency of portfolio reviews in the past three years, finds the biannual EY capital confidence barometer, which surveys business executives worldwide.

Read: Spring training for portfolios

Business opportunities offered by new technology, as well as the threat from digitally savvy competitors and startups, are driving transformation plans, says the report.

Portfolio review allows executives to make decisions to better equip their businesses for the future, at a time when the economy is improving, credit is still freely available and corporate earnings are at record levels.

Actions taken by executives after recent portfolio reviews signal that timely action is critical: almost three-quarters (74%) expect to achieve their objectives within 12 months. Of those taking specific actions, more than one-third (39%) identified an asset at risk of disruption to divest, and another third (32%) identified an underperforming asset to divest.

Read: How Canadian execs are dealing with changing tech landscape

Let’s make a deal, eh?

The EY survey also finds that global business executives view Canada as a top investment destination—number three in the world.

Read: Canada among OECD’s cleanest countries: Fraser Institute study

“The world is taking notice of recent positive economic developments and turning to Canada,” says Doug Jenkinson, a partner in EY Canada’s transaction advisory services practice, in a release. He notes that this is Canada’s highest ranking since the survey began in 2009.

“It’s not just global sentiment that’s reaching a new high,” he adds. “The number of Canadian executives intending to pursue acquisitions continues to climb.”

The survey finds 78% of Canadian executives plan to actively pursue deals in the next 12 months as a key avenue for growth and a way to streamline businesses. This shows a much higher appetite than the 54% of U.S. and 52% of global respondents who plan to do the same.

Further, deal pipelines are robust. The survey finds 73% of Canadian executives expect their mergers and acquisitions pipeline to increase in the next year—a 40% jump in the last six months.

Part of this resurgence can be credited to higher activity in financial services, mining and metals, and consumer products and retail sectors. Also fuelling intentions is strengthening optimism in local and global economies, with a strong majority of Canadian executives expecting local and global economies to improve.

Despite this optimism, potential changes to NAFTA loom on Canadian executives’ minds. Almost half (49%) list trade policy uncertainty and protectionism as the greatest threats to business growth.

However, uncertainty south of the border doesn’t seem to be impacting earnings expectations. Two-thirds of Canadian respondents (66%) have stable confidence in corporate earnings, compared to only 33% just six months ago.

For more details, read the EY capital confidence barometer.

Originally published on Advisor.ca
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