Top executives at the world's largest companies expect a rise in demergers over the next year as shareholders pressure companies to focus on core activities and unlock value, legal firm Allen & Overy said on Wednesday.

Two-thirds of the FTSE 350 and Fortune 500 company executives surveyed saw active or very active demerger activity in their sectors in the next 12 months, with growth coming mainly from continental Europe and the Asia Pacific region, according to the study commissioned by Allen & Overy.

Activist shareholders, hedge funds and private equity have really changed companies' mindset, Allen & Overy's Global Head of Mergers and Acquisitions Richard Cranfield told reporters in London.

Historically, demergers were seen as the sign of management failure but the number of demergers has increased and it's not just part of the mergers and acquisitions boom, it's a mainstream strategy, he added.

FTSE directors expected a rise in demergers in continental Europe where large conglomerates have been traditionally protected by local government but now have to respond to a shareholder base increasingly made up of private equity firms and hedge funds.

Fortune 500 respondents said large businesses in the Asia Pacific region were most likely to spin off divisions.

Telecommunications, consumer and financial services were seen as the sectors with greatest potential for demergers.

The recent deterioration in debt markets made demergers an easier strategy than a sale or initial public offering, Allen & Overy partner Alun Eynon-Evans said.

If a sale is not such a ready option because private equity has reduced its activity because of credit issues a demerger becomes a more attractive or available option, he said.

Cadbury, the world's biggest confectionery maker, last week postponed the sale of its North American soft drinks business to private equity and said it was now fully prepared to demerge the business if debt markets didn't improve.

Pressure from investors led by U.S. billionaire Nelson Peltz is widely believed to have prompted its decision to sell or spin off its drinks unit.

Allen & Overy's survey said the U.S. would remain the leading market for demergers globally given the more mature and transparent relationship between investors and companies.

The six largest demergers since January 2006 were all U.S. companies, topped by Altria's $61.6 billion spin-off of Kraft Foods Inc., according to Thomson Financial data quoted by the Allen & Overy survey.