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Australasian Capital Confidence Barometer, May 2011: Ripe for the picking? - EY - Australia

Australasian Capital Confidence Barometer, May 2011

Ripe for the picking?

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Australasia respondents were considerably more focused on acquisitions in emerging markets than our global counterparts (36% Australasia vs. 26% Global), and from the previous year (36% April 2011 vs. 26% October 2010).

Our fourth Australasian Capital Confidence Barometer reports that growth is now a priority, with smaller players looking at organic investment, demergers back in play and corporates honing in on emerging markets.

Despite a healthy 29% of businesses looking at M&A opportunities, Australasian respondents are less likely to acquire than the previous year. However this trend is likely to be short lived with more than half of Australasian respondents saying credit conditions have improved in the past six months and 40% saying that access to finance is not an issue.

The story is a little different for mid caps and smaller businesses, with many still needing to refinance and those who don’t primarily focused on paying down debt or organic growth. M&A activity is likely to pick up in this space throughout 2011 and most probably in the form of script based mergers with peers.

Although there continues to be a gap between buyer and seller price expectations and a flow-on effect creating concerns around a shortage of quality deal opportunities, we expect this to close in the longer term. M&A activity will also be bolstered with demergers back in play, continued inbound investment especially from China and India and with larger corporates honing in on emerging markets.

Focus on acquisition in emerging markets

Australasia respondents were considerably more focused on acquisitions in emerging markets than our global counterparts (36% Australasia vs 26% Global), and from the previous year (36% April 2011 vs 26% October 2010) and it is likely Australasian respondents are looking to our nearest neighbours in Asia for growth opportunities.

Demergers rise

The rise of the demerger is evident; 20% of Australasian respondents say divestment is likely in the next six months, slightly up from October last year, and the trend for joint ventures has inclined consistently throughout our barometers.

Optimising capital structure

Australasian businesses are also focused on building sustainable improvements into their business operations. Optimising capital structure is a key focus area, increasing to 41% from 26% in October.

If businesses haven’t already, it will be important to recalibrate debt and equity levels to the new operating environment, maximising value and minimising the average cost of capital.



Pip McCrostie Pip McCrostie

Global Vice Chair,
Transaction Advisory
Services;
Graeme Browning Graeme Browning

Oceania Managing Partner,
Transaction Advisory
Services

In the following pages, we look closer at the study across the following topics:


About this survey

EY's Capital Confidence Barometer is a regular survey of senior executives from large companies around the world conducted by the Economist Intelligence Unit (EIU).

Our panel, the "EY 1,000" is comprised of selected EY clients and contacts and regular EIU contributors.

Profile of respondents
  • Panel of over 1,000 executives surveyed in February and March 2011.
  • 97 respondents from Australasia.
  • Cross-section of respondents from over 40 industry sectors.
  • 559 CEO, CFO and other C-level respondents.


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