CFO | Capital Confidence Barometer
EY interviewed 356 leading CFOs as part of our semiannual Capital Confidence Barometer, capturing their influential perspectives on the economy, growth, access to capital, M&A and more. The findings echo CFOs’ call to “thrive,” with “survive” quickly becoming parlance of the past.
Economic confidence rising
Based on CFOs’ dramatically rising confidence in the economy, there’s optimism in the C-suite:
- 60% feel that the global economic outlook is improving, compared to 26% in October 2012
- 44% of CFOs see some improvement to their local economy, compared to 36% a year ago
- 63% have positive outlook toward global economic growth as indicated by specific economic indicators that than more than doubled in the past year
Pinning percentages to improvements, 60% anticipate economic growth to rise between 1% and 3% in the next 12 months. An optimistic set of CFOs (22%) anticipate 3% to 5%.
Improved access to capital
CFO confidence in credit availability rose to 50% from 28% in October 2012, reflecting the gradual easing of credit availability – and its significant implications. That growth is one reason for their optimism because in today’s economy the increased availability means more options for financing deals, resulting in accelerated corporate growth.
When asked to name their likely primary source of deal financing, 36% say debt and 16% say equity – over 31% and 13%, respectively, six months ago. More than a third (36%) plan to refinance loans or other debt obligations in the next year, a small but significant step up from their October 2012 outlook (27%).
Setting sights on growth strategies
CFOs have placed their attention on growth, with 55% citing growth as a primary focus – an increase from just over a third (34%) from a year ago. The majority of CFOs indicate that they are adapting to the new imperatives of the current economic and business environment, connoting a pragmatic view of challenges balanced by a steadily improving growth appetite. “Grow with what you know” appears as the prevailing approach, as new markets and R&D investments don’t merit as much CFO interest as established avenues for expansion.
Which way will they grow?
- 38% expect to strengthen their balance sheets by paying down debt
- 41% expect to place more rigorous emphasis on core products and existing markets
M&A activity expected to rise
A number of positive factors contribute to CFO confidence in the M&A pipeline. Dynamics influencing dealmaking are:
- Alignment of core fundamentals
- Positive economic sentiment
- Readily available credit
A sound majority (67%) expect M&A volumes to improve across the globe over the next 12 months. In parallel with CFOs’ perspectives on their local economy – they’ve less optimism for deal volume; 51% expect deal volume to increase in their own jurisdiction.
Mature markets will continue as fertile, primary ground for deals, while emerging markets and non-BRIC frontier emerging markets will increase their presence in the M&A landscape.
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