EY has recently released the 12th edition of its annual Global Capital Confidence Barometer, a biannual survey of more than 1,600 executives of companies in 54 countries, assessing various metrics in global mergers and acquisitions. Although 2014 marked the single largest increase in M&A since the financial crisis of 2008, for the first time in five years, more than half of the respondents of the survey indicated that they are planning acquisitions in the next year, signalling recovered earnings and cash positions, or at the very least, increased optimism regarding the trajectory of markets. The survey points out that there are three concrete factors that have together resulted in this global change: (1) an increase in the number of market players, including start-ups; (2) an increase in cross-border transactions that have been encouraged by fluctuations in currency and oil prices; and (3) “disruptive” innovation.
Along similar lines, EY reports that 83% of executives view the global economy as improving, after what has been a shaky half-decade—this is up from 60% from last year. Forty per cent of respondents indicated that they are embracing an “acquisition strategy” as their overall corporate strategy, which will serve to hasten the “interdependence” of national economies as trade, investment and systems further converge. Roughly one-third of executives are planning larger deals and many are contemplating bolt-on deals and complementary deals. In total, respondents indicated that 2,695 deals are currently being considered, representing a 19% year-over-year increase. In support of this, an overwhelming majority of executives expect that the valuation gap and the price of assets will remain stable, which will create respectable conditions for M&A activity.
Currently, 77% of companies are planning deals valued under $250 million, with 21% planning deals between $250 million and $1 billion. The three industries in which companies intend to create M&A activity are technology (67% of all deals), automotive (59%) and consumer products and retail (58%). Over half of the deals are planned to take place between countries in the same region, which is “driven by the ease of acquiring in common economic trading areas,” such as the European Economic Area and NAFTA region. The top investment destinations are expected to be the United Kingdom, China, the United States, Germany and Australia, while the top investor countries are the United States, South Korea, the United Kingdom, France, Germany and Japan.
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