The 13th edition of EY’s Global Capital Confidence Barometer finds companies pursuing deals at a rate not seen this decade. As 2015 global M&A value approaches record highs, executives’ long-term growth considerations outweigh short-term concerns about market volatility.
With deal intentions at a six-year peak, executives’ economic optimism is steadfast, and companies are pursuing bolder, more innovative growth strategies.
In 2015 we have seen continued volatility in commodities and currencies, intense swings in equity markets and decelerating growth in several key emerging economies. Despite these challenges, companies remain confident about dealmaking in the current macroeconomic environment.
Almost half of companies are now looking at acquisitions beyond their traditional industry boundaries, fueled by innovative disruption and changing customer preferences. Cross-border as well as cross-sector deals will also be a big part of the M&A story. The majority of potential acquirers are looking beyond their own national borders – with intentions around deals in the eurozone strengthening.
With all signs in the deal market pointing upward, some analysts raise the prospect of a market overheating. However, executives are proceeding judiciously as they look to M&A for growth. They are conducting more thorough due diligence, including new levels of cyber risk scrutiny. And they are prepared to walk away from transactions that do not meet their strategic goals.
In short, M&A is back as an essential mechanism for generating long-term value. With global macroeconomic growth tempered and their industries perpetually challenged, executives are searching for more than organic growth. In government and global leadership circles, “sustainability” has long been a buzzword for big-picture thinking about the interdependence of nations and resources to support development worldwide. In their way, executives are pursuing their own form of corporate sustainability, reimagining their businesses to both safeguard the last decade’s cost-reduction rigor and build the next decade’s platform for growth.