By Fraser Tennant
Growth in the worldwide mergers and acquisitions (M&A) market is set to hit its highest level in five years, according to EY’s 12th Global Capital Confidence Barometer.
The Barometer, a biannual survey of more than 1600 executives in 54 countries, suggests that the appetite for acquisitions in the market is healthy at present, with 56 percent of global companies intending to acquire in the next 12 months.
EY’s Barometer paints a picture of an already potent market poised to expand further with: (i) global deal value already up 13 percent on 2014; (ii) the number of deals currently in the pipeline up 19 percent on 12 months ago; (iii) 84 percent of firms planning deals abroad; (iv) three-quarters of firms (73 percent) seeking ‘innovative M&A’ deals; and (v) almost half of companies (47 percent) stating that they intend to complete more deals over the next 12 months than they did in the preceding year.
The UK, China, the US, Germany and Australia are likely to be the top five destinations of choice for investors, according to the Barometer and, in terms of buyers, the US, South Korea, UK, France, Germany and Japan will be the most prominent acquirers. Furthermore, the sectors with the highest level of acquisitive intent are expected to be technology, automotive, consumer products, diversified industrials and financial services.
“The appetite for deals is at a five-year high," says Pip McCrostie, EY’s global vice chair for Transaction Advisory Services. “The Barometer reveals three reasons for the sharp increase in deal making intentions. First, economic divergence fuelled by commodity and currency fluctuations is accelerating cross-border M&A. Second, disruptive innovation is driving inorganic growth strategies at every level of enterprise. Finally, we will see the impact of new entrants and companies returning to the deal market after a hiatus.”
The Barometer also suggests that new buyers will be the ones driving dealmaking activity in 2015, following a period of relative inactivity caused by the recent M&A downturn. “M&A turned a corner in 2014 with deals once again being seen as a route to growth," claims Ms McCrostie. “2015 will see a surge of new entrants and companies returning to the M&A market to generate future growth.”