The global appetite for mergers & acquisitions has reached its the highest point in five years, EY’s Global Capital Confidence Barometer shows. With companies more confident in the global economy and expectant of an improved deal market, 56% of companies will actively pursue an acquisition in the coming year and 47% plans to complete more deals than the year before.
Professional services firm EY recently released the twelfth edition of its biannual ‘Global Capital Confidence Barometer’, for which it surveyed than 1,600 senior executives from large companies in 54 countries and across industry sectors.
The barometer shows that confidence in the global economy is returning, with 83% of respondents now feeling optimistic as they believe the economy is improving, up from 53% six months ago and 60% last year. According to EY, this improved confidence provides strong foundations for deal intentions, with almost all respondents (98%) expecting the deal market to improve or remain at its current levels in the coming year.
More than half (56%) of global companies indicate an expectation to actively pursue acquisitions in the coming year, 25% more than in the same period last year and an 16% more than in six months ago, representing the highest appetite to acquire recorded by the survey in five years. More than three-quarters (78%) of companies have changed their M&A strategy as a result of increased deal activity in 2014, either planning relatively larger deals (31%), considering more mid-sized deals (26%), or planning deals in different sub-segments (21%).
Almost half (43%) of companies plans to complete one acquisition in the coming year, around a third (36%) plans to complete two, and 10% three. Comparing this to the prior 12 months, 47% intend to complete more deals in the coming 12 months than they did in the past 12. Underlining a firmly entrenched M&A resurgence, EY indicates.
The number deals in pipeline also increased compared to last year, with 19%, from 2.273 in 2014 to 2.695 in 2015. Especially the firms with the largest pipelines are planning to further increase the number of targets in the next year, with 63% of companies with four deals in their current pipeline and 61% of those with five or more deals planning to increase their deal pipeline.
Commenting on the results, Pip McCrostie, EY’s Global Vice Chair of Transaction Advisory Services, says: “M&A turned a corner in 2014, 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.”
* Grant Thornton recently released similar research into the global appetite of businesses for mergers and acquisitions (M&A), with a focus on mid-sized enterprises, showing that a third of businesses plan to grow through an M&A in the coming three years.