Deal pipelines will swell rapidly in the next 12 months as more Australian companies return to the mergers and acquisitions market, according to the latest survey data from EY.
EY’s latest six-monthly Australasia Capital Confidence Barometer shows the number of companies intending to pursue an acquisition in the next 12 months has more than doubled from 32% six months ago to 66% now.
At the same time, corporate confidence in the quality and number of acquisition opportunities is at a four-year high.
The report is based on a global survey of more than 1,600 senior executives in 54 countries, including 157 in Australia and New Zealand.
Graeme Browning, EY Oceania Transaction Advisory Services Leader, says companies are catching up with their global counterparts in pursuing deals again.
“Anyone sitting on the sidelines risks being left behind. This is an opportunity for sellers as well as buyers,” he says.
However Browning says there is a danger corporates may over-pay for assets or fail to extract value from acquisitions.
“Deals are back but the game has evolved,” he say. “We expect to see a lot more contested M&A in the next 6-12 months. Success will come to those who are absolutely clear on strategy, disciplined with due diligence and move quickly.”
Key findings in Australasia:
- 96% believe the economy is improving or stable, on par with 95% six months ago and up from 80% a year ago
- 66% intend to pursue an acquisition in the next 12 months, compared to 32% six months ago
- 68% expect their debt-to-capital ratios to increase over the next 12 months, compared to 32% six months ago and 19% a year ago
- 90% are confident in corporate earnings, compared to 77% six months ago and 46% a year ago
- 72% are confident in credit availability, compared to 71% six months ago and 46% a year ago
- 81% are confident about equity valuations, compared to 63% six months ago and 25% a year ago
- 75% are confident in short-term market stability, compared to 61% six months ago and 20% a year ago