Ernst and Young (EY) have released their 12th Global Capital Confidence Barometer and have predicted an M&A boom in 2015, due to the fact that more than half of the companies surveyed are pursuing acquisitions this year.
The biannual survey, which questions more than 1,600 executives in 54 countries, showed that interest in mergers and acquisitions is at a five year high with 56% of global companies planning to acquire within the next 12 months. Global deal value has already increased by 13% since 2014 and there are 19% more deals in the pipeline than there were 12 months ago.
As a result of this increase in M&A activity, 78% of the companies surveyed have changed their M&A strategy due to high levels of confidence that the current market will remain strong or improve in the next year.
The survey results show that this optimistic outlook is spreading to company executives, with 83% of C level team members saying they are confident about acquiring, as opposed to 53% six months ago. Alongside this, 72% of participants consider their corporate earnings to be healthy now while only 66% felt the same way about their profits 12 months ago.
Ernst and Young Global vice chair of Transaction Advisory Services, Pip McCrostie said that M&A deals have reached a five year high due to economic conditions and disruptive innovation. “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.”
However, some companies still view global and regional political instability as a big risk, in addition to the threat of variation of price for commodities and currencies. These are drawbacks for some corporations but others use this situation as an opportunity to merge or acquire other businesses.
McCrostie also commented on how “this volatility is also driving M&A momentum through increased consolidation and executives searching for growth outside their domestic market.”
The survey displayed that 84% of executives are targeting international investment opportunities and 54% of participating companies said that they are focusing their M&A strategy on cross border deals in their immediate region, 30% are focused outside this region and 16% plan to deal in their domestic market.
The five most popular destinations for investors are the US, the UK, Germany, China and Australia and the EY survey predicts that the most prominent acquirers will be from the US, the UK, South Korea, France, Germany and Japan.
The results also showed that companies will try to move into different sectors to help their business as a whole and that 73% of those planning to do deals are interested in innovation.
There will also be an influx of new buyers in 2015, according to the results, who have been waiting on the side-lines for a M&A boom to occur so that they can enter the transaction market. According to the survey results, businesses will concentrate on mid-market deals, with 77% of businesses planning deals under $250 million because within the past six months acquisitions between $250 million and $1 billion have grown by 50%.
McCrostie summarises that in 2014, “M&A turned a corner, with deals once again being seen as a route to growth. 2015 will see a surge of new entrants and companies returning to the M&A market to generate future growth.”
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.
Tim de Knegt, strategic finance and treasury manager for the Port of Rotterdam, discusses how he is using blockchain, the challenges he will face in his role of treasury over the next 12 months and the advice he would give to someone starting out their career in treasury.
Treasurers are more interested in cross-border payments and automation than real-time payments, as they are consistently asked to do more with less, argues Rick Burke, head of corporate payments at TD Bank in an exclusive interview.
With rising interest rates being a hot topic at this year’s AFP conference, many treasurers were discussing how they can structure their ... read more