Merger and acquisition (M&A) deals have become “an imperative, not an option” for companies, with 57% of global corporate decision makers polled in a survey by accountancy group EY expecting to pursue deals over the next 12 months.
EY’s latest Global Capital Confidence Barometer report is based on responses from more than 1,700 executives in 45 countries, who were polled in August and September.
Worldwide M&A spending currently stands at around US$2.2 trillion, down 20% from last year’s record, according to EY’s data. The survey suggests that volume is likely to move higher again over the next year, as a fragile economic environment persuades more companies to turn to M&A deals to produce growth.
The latest survey finds that the US, China, Germany, Canada and France are the top five locations for deals activity. The UK ranked seventh for investment, down from second last year and the first time it failed to make the top five since 2009. Concerns over the country’s plans to exit the European Union (EU) had added complexity to international deals, said EY.
Business leaders also cited geopolitical issues, such as the rise of nationalist governments worldwide and currency fluctuations, that make cross-border M&A deals more difficult. In addition to the UK’s Brexit vote in June, uncertainty around the direction of the US interest rate and elections in several countries over the next year added to perceived risks to deals.
However, more than 90% of executives surveyed expect the M&A market to improve or remain stable in the next year, with the focus shifting to smaller deals in consumer and retail, industrial products, life sciences, technology, automotive and oil and gas industries.
“Brexit is a prominent example of the rise of geopolitical changes that are adding complexity to cross-border investments,” said Steve Krouskos, EY’s global vice chair of transaction advisory services. “In the longer term, we would expect the UK to bounce back as a top M&A destination of choice, but the short-term uncertainty is giving investors pause for thought.”
However, he added: “Political uncertainty is an impediment not a barrier to M&A. Companies continue to take a long-term strategic view on investments. The UK remains a formidable economy with great talent, great assets and a long history of innovation and success.”
According to data from Bloomberg, since the start of this year around US$208bn in M&A deals involving UK companies have been announced – down 55% from the same period in 2015.
The top five sectors Asian fintech investors are interested in are data analytics, blockchain, lending, payments and regtech, according to Gary Hwa, EY regional managing partner.
On the third day of the Singapore Fintech Festival conference, there was a focus on specific applications of fintech innovation. One was trade finance, which is clearly is ripe for a revolution.
Kicking off day two of the Singapore Fintech Festival, Deloitte Chairman David Cruikshank said that fintech is significant for three reasons. First, customer expectations of services are higher than ever. Second, barriers to entry are lower than before. And finally, financial institutions (FIs) face a threat of what a competitor might do.
The EU and US’ shift in accounting standards may bring balance sheet losses and increase credit risk, according to James Elder, director of risk services at Standard & Poor’s (S&P) Global.