World businesses have appetite for mergers, acquisitions despite market turbulence – Ernst & Young

Fueled by stronger balance sheets and falling debt levels, world businesses surprisingly have appetite and confidence for more mergers and acquisitions (M&A) deals in an uncertain market, according to Ernst & Young’s (E&Y) latest Capital Confidence Barometer despite economic turbulence and market turmoil.

E&Y says the survey, conducted among more than 1,000 senior executives worldwide, showed that 41% of leading international companies expect to make an acquisition in the next 12 months.

“Stronger balance sheets together with a greater focus on operational fitness mean there is a continued appetite for M&A among large cap corporates. There is also a greater convergence around the price of assets, encouraging sellers to come to the table. Almost two thirds (57%) see valuations remaining at current levels for 12 months, resulting in a 30% uptick in potential sellers compared with six months ago – 26% of businesses now plan to divest in the next year,” says the UK-based accounting firm after releasing the survey early October this year.

The Barometer, E&Y said, found that almost half of respondents are focused on growth in the next 12 months, with only 7% now focusing on survival – the lowest number since the barometer was first published in 2009.

“Two-thirds (63%) of respondents feel that the global economy is at least stable. Confidence is particularly high in sectors such as power and utilities, oil and gas and metals and mining,” it said despite concerns over weakening global growth, declining growth in the US, coupled with the country’s credit downgrade and the escalating sovereign debt crisis in the Eurozone.

The most attractive markets for investment according to the survey are China, India, Brazil, the US and Australia. Outside the recognized BRIC countries Malaysia, Mexico and Argentina are the three most popular emerging market destinations for investment, E&Y added.

Commenting on the survey, Pip McCrostie, Global Vice-Chair, Transaction Advisory Services, at Ernst & Young said“There is a new paradigm with M&A activity and market volatility now able to co-exist. Currently, leading companies are shrugging off continued market upheaval and focusing on growth and M&A. For them this is not 2008 all over again.

They have spent the past three years reducing the financial risk on their balance sheet and taking tough efficiency measures needed to strengthen their positions, which helps them manage in volatile times.”

By Ekow Quandzie

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