Advisory firm EY is expecting an uptick in M&A activity in the coming year as Australian business confidence improves and companies turn their attention from cost-cutting to growth.
EY’s latest global Capital Confidence Barometer, which involved a survey of about 150 Australia and New Zealand executives, found 34% of local firms planning to pursue an acquisition in the next 12 months, up from 24% in April and 20% a year ago.
Ninety-three percent of Australasian respondents expected the local economy to grow and 70% said their focus had shifted to growth, “well ahead of the global trend (58%), which Australasia has lagged for the past two years,” EY reported.
From the report:
Planned acquisitions have returned to their April 2011 levels. Expectations for deals between $500 million and $1 billion have more than doubled in the past six months.
Yet, this is still a cautious M&A environment. While almost 70% expect to see greater deal volumes, only about a third are planning to participate in M&A.
Prices are likely to go up as more buyers chase a still constrained supply of targets. Those with growth on the agenda have few other places to turn.
M&A activity will pick up – and there will be substantial first mover advantages for those prepared to jump first.
Of the Australasian firms looking to pursue buy-outs this year, a majority (66%) said the plan was driven by gaining share in existing and new markets, of which the top destinations were India, China, Vietnam, South Africa and Thailand.
About a third of all the Australia and New Zealand respondents blamed regulatory concerns for holding back their acquisition plans. EY said M&A activity would lift further when the political debate over the carbon and mining taxes was resolved.