Mergers and acquisitions will continue to pick up their pace over the next 12 months.
In the recently released EY Global Capital Confidence Barometer survey, more than three-quarters (83%) of senior-level executives surveyed said they plan to actively pursue M&A deals over the next 12 months, the highest level on the barometer in six years.
Some 15% of respondents said they believe mergers and acquisitions will remain “stable,” and only 2% of executives believe M&As will begin to decrease over the next 12 months.
When asked about the number of deals they are planning to pursue over the next year, 88% of executives said they had at least two or three deals in the pipeline. More than half said they have three or more deals in the pipeline.
Executives also told EY that they expect upper-market deals worth between $US250 million and $US1 billion to increase.
“We see strong evidence of companies planning to pursue more transactions in the next 12 months than they completed in the prior year,” EY said.
The top industries expected to engage in mergers and acquisitions include consumer products and retail, automotive and transportation, real estate, and life sciences.
“A desire to establish inorganic growth to buffer against any potential economic downturn is a main driver of deal activity,” EY said.
Despite economic concerns, China still remains the top area of interest for mergers and acquisitions among firms in the US, China, and Germany. EY notes that the country’s growth rate of nearly 7% remains an attractive factor relative to the global economy.
While China remains a strong region for US investment, mergers and acquisitions in America are not dominated by American businesses. Businesses in the UK and China are the largest acquirers of US-based companies. This shift is largely based on the strength of the US dollar, which is leading American companies to seek out acquisitions in areas where the strong currency earns them a higher immediate return on their investment.
While companies are increasingly willing to engage in mergers and acquisitions, they are also being more cautious in terms of cybersecurity. The barometer found that 86% of executives listed security concerns as a major concern in the deal-making process. Nearly all (96%) of respondents said they have canceled deals because of cybersecurity concerns.
“They are conducting more thorough due diligence, including new levels of scrutiny,” said Pip McCrostie, EY’s global vice chair of transaction advisory services. “And they are prepared to walk away from transactions that do not meet their strategic goals.”
Rich Jeanneret, EY Americas vice chair of transaction advisory services, believes the M&A boom is good for business. “As executives balance exuberance and prudence, this period of cautious M&A could lead to a sustained deal boom that will benefit a multitude of companies’ growth goals,” he said.
You can read the EY survey in its entirety here.
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