Almost half of Canadian execs have M&A on the agenda this year: EY survey

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(Toronto, 9 May 2012) While still cautious, Canadian executives are hungry for M&A, with 48% expecting to pursue an acquisition in the next 12 months, according to findings from a recent EY survey. That’s up from 32% in April 2011.

That surge of confidence bucks the global stats, showing only 31% of respondents around the world, and 34% of US respondents, expected to do the same. These figures dropped from 41% and 34%, respectively, in October 2011.

“In Canada, confidence in the local economy has more than doubled,” says Tony Ianni, a partner in EY’s Transaction Advisory Services practice. “While there is still volatility and corporate executives are still cautious, their outlook is more positive than many global respondents who operate in a more challenging environment.”

Of the Canadian participants surveyed:

  • 31% of Canadian businesses are looking to divest, up from 23% in October 2011.
  • 80% believe the number of deal opportunities is increasing, and more than three-quarters believe the likelihood of closing deals is greater than it was six months ago.
  • 75% view credit availability as stable or improving.
  • 72% believe the Eurozone crisis has affected their business.

While Canadian corporate executives are in a more confident frame of mind, particularly compared to the rest of the world, they are still fundamentally cautious. Persistent market volatility, austerity measures, the Eurozone crisis and potential slowing of growth in emerging markets have continued to fuel conservatism.

“The findings indicate that most Canadian executives feel the Eurozone crisis has had a negative impact on their business,” says Ianni. “A lot of the caution we’re seeing from these executives stems from the fact that they do business with other less stable economies; but they still believe there are deal opportunities, especially in emerging markets.”

However, with most of the ingredients now in place for a favourable M&A environment in Canada — plentiful cash reserves, adequate credit availability and rising economic confidence — deal opportunities are increasing, and the quality of potential targets continues to improve.

As for acquisitions outside of their local marketplace, Canadian respondents’ top investment destinations include the US, China, Hong Kong, Singapore and India. They identify financial services, life sciences (including healthcare), consumer products, oil and gas, and technology as the most active in acquisitions.

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About the survey

EY’s Global Capital Confidence Barometer is a survey of more than 1,500 senior executives from large companies around the world and across industry sectors. The Barometer’s objectives are to gauge corporate confidence in the economic outlook, understand boardroom priorities over the next 12 months, and identify the emerging capital practices that will distinguish companies that build competitive advantage as the global economy continues to evolve. This is the sixth twice-yearly Barometer in the series, which began in November 2009.

About EY

EY is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.