For the time being, our respondents have learned how to manage in volatility.
Our fifth Capital Confidence Barometer predicts a new paradigm: corporate M&A activity and extreme market volatility coexisting. There is a surprisingly stable appetite to do deals over the next 12 months, as top global corporates remain resilient to the market turbulence.
Leading corporates have spent three years focusing on reducing financial risk, operational fitness and learning to live with volatility:
- Balance sheets are stronger with less leverage
- Companies have re-financed to improve their capital structures, reduced interest costs and extended maturities
- Funding conditions have improved and can support growth
- Many companies can draw upon cash war chests
- Earnings growth outlook is positive
Consequently, the focus is now clearly on growth, with the fewest number of respondents since 2009 focusing on survival.
We also see an increased consensus around asset values, resulting in a 30% rise in potential sellers coming to the table globally. All of this fosters a favorable environment for M&A but some barriers do remain — mounting regulatory pressures could impede growth.
In addition, there is the fundamental question of the economy. While our respondents’ M&A attitudes are remarkably robust given the current environment, a slump into a double-dip global recession or another banking crisis would mean all bets are off.
Our respondents have learned how to manage in volatility: they have the capability — and ambition — to do strategic deals in the current climate.
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Global Vice Chair
Transaction Advisory Services
About this survey
The 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 “Ernst & Young 1,000” is comprised of selected Ernst & Young clients and contacts and regular EIU contributors:
- Panel of over 1,000 executives surveyed in July and August 2011
- Companies from 51 countries
- Cross-section of respondents from over 40 industry sectors
- 700 CEO, CFO and other C-level respondents
- 768 companies would qualify for the Fortune 500 based on revenues
This snapshot of our findings gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their capital agenda.
To learn more about specific country and sector perspectives, read our customized reports.