EY - Bridge, Newcastle Upon Tyne, Tyne and Wear, England

April-October 2013

Canadian Capital Confidence Barometer

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Looking to the future

Canadian confidence is up, but appetite for deal-making in the next 12 months continues to trend downwards.

Our eighth Capital Confidence Barometer shows a clear rebound in corporate confidence. While Canadians have shown more willingness for making deals in the last year than both US and global respondents, increased confidence isn’t translating into increased transaction activity. Canadian executives expect to remain cautious in the short term.

Expectations for global economic growth, credit availability and employment growth are at some of the highest levels in two years. Normally this positive sentiment would translate into significant capital investment and M&A activity. However, uncertainty in the US with regard to fiscal policy and sequestration, slowing growth in emerging markets and continuing concerns of eurozone stagnation are persuading Canadian businesses to wait a little longer before acting.

Respondents around the world, and particularly in Canada, are gravitating towards lower-risk value creation and growth strategies, including organic growth, optimizing capital structures, and more rigorous cost control and operational efficiency.

In short, executives are experiencing a confidence paradox. Respondents expect deal volumes to rise, but they themselves do not have near-term plans for transformational M&A activity. We regard these as signs of a deal-making inflection point, as executives position their companies for growth. While it may take some time before we see plans turn into action, corporate leaders are undoubtedly setting the stage for a bolder future.

Tony Ianni, Partner, Transaction Advisory Services

Which best describes your organization’s focus over the next 12 months?

Which best describes your organization’s focus over the next 12 months?