M&A still the way to go - EY

BY Richard Summerfield

2015 has seen the continuation of considerable volatility and uncertainty in areas of the global economy. Commodities and currencies have remained unpredictable while emerging markets have floundered – China in particular has experienced a notable slowdown this year.

Yet despite these difficulties, companies have remained committed to pursuing M&A deals. 2015 has been a notable year for deal activity, and that appears certain to continue into 2016, according to a new report from EY.

EY’s latest biannual report – the Capital Confidence Barometer – surveyed 1600 senior executives from large multinationals about their global and domestic economic outlook.

The report suggests that companies remain confident about dealmaking in the current global climate, despite some considerable headwinds. Fifty-nine percent expect to pursue acquisitions over the coming 12 months, up from 56 percent of respondents in April’s report. EY believes that the swell in M&A appetite follows the stabilisation of business confidence among top companies.

Notably, many firms are looking to complete deals outside of their typical industry boundaries. According to EY, this strategy toward targeting cross sector deals has been partly driven by changing customer preferences and the impact of innovative disruption.

Cross-border activity is also set to play a key role in shaping M&A activity. As competition for assets and value creation heats up, companies are continuing to look beyond their national borders to target new areas of growth. According to the survey respondents, the eurozone is an increasingly attractive investment location.

“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,” says Pip McCrostie, EY’s global vice chair of transaction advisory services. “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."

Report: EY Capital Confidence Barometer, October 2015

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