Global mergers and acquisitions (M&A) conditions look set to drive dealmaking for the remainder of 2017, buoyed by strengthening economic activity in the eurozone, and growth in China and the United States, according to the EY 17th Global Capital Confidence Barometer (CCB).
With all major engines in the global economy now synchronized in an upward trajectory, a resounding 98% of executive respondents believe global economic growth is stable or improving. Within that economic context, the biannual survey of nearly 3,000 executives across 43 countries finds more than half (56%) of these companies are planning a deal within the next 12 months.
The majority (60%) of executives expect increased competition for assets. Of those, 51% cite private equity as the biggest competitor in the hunt for assets and almost a fifth (19%) of all executives foresee a rise in hostile approaches in the next year. A record high (99%) of global executives believe the M&A market will improve or remain stable in the next year – and just 1% foresee a decline in deals.
Increasing globalization counters nationalistic sentiments
While concerns regarding regulation and market access have increased, almost three-quarters (73%) of companies are looking beyond their countries’ borders for M&A investments.
According to the survey, Europe’s economic revival is creating a powerful draw for inbound investment from across the world. Meanwhile, the UK retains a leading position as an investment destination despite uncertainty over trade agreements relating to Brexit.
Sectors converge around technology’s center of gravity
Convergence across all industries – and particularly in the technology sector – is highlighted in the survey, with many executives looking at technology investments as the gateway to their digital future. While 38% of companies aim to develop digital capabilities in-house, 30% intend to transform their digital future through acquisitions, joint ventures and alliances.
The top five sectors with the highest acquisition appetite are oil and gas (69% plan to acquire), mining and metals (63%), life sciences (60%), telecommunications (59%) and industrial products (59%).
Corporate venture capital (CVC) investments look set to be a key investment instrument across all industry sectors, with almost two-thirds of companies (63%) currently using or planning CVC to buy future opportunities.
The survey finds that the top five investment destinations of choice among executives are the US, China, UK, Germany and Australia.
Shareholder activism still on the rise while inclusive growth demanded
Activist intervention continues its upward trend as investors look for higher returns in better economic times. Companies that are under-scale, cash strapped or struggling in consolidating industries are under more pressure than ever before from shareholder activists. The vast majority (91%) of executives expect the number of companies impacted by shareholder activism to increase or remain at already robust levels.
Almost half (43%) of executives expect North America to see the greatest increase in shareholder activism, while 31% cite Europe and 26% cite Asia-Pacific.
Executives to deal with complexity through M&A
Greater confidence in global economic growth than at any time since the global financial crisis, while positive, is creating powerful new challenges for global businesses, the survey finds. It requires an even keener focus on organic and inorganic growth, as well as cost efficiency to meet rising investor demands in an increasingly complex business environment.
Originally published on ey.com.
EY Legal Services Contacts:
Richard Norbruis – Global Transaction Law Leader