Capital Confidence Barometer, October 2013
Access to capital — credit availability drives momentum
To advance their strategic imperatives, companies will take advantage of improving credit conditions.
A willingness to use leverage and the view that credit availability is at the highest point in two years signal a growing confidence in the long-term economic outlook.
The returning use of leverage also indicates a fundamental shift in the deal-making environment, which was previously dominated by conservatism and the reliance on cash for financing. The overall optimism, expectations for growth and the use of greater leverage will lead the way to more and larger deals, which will create M&A momentum globally.
Q: Please indicate your level of confidence in credit availability at the global level
Credit availability inspires growth
The vast majority of executives consider access to credit as stable or improving. Furthermore, the sentiment on improving credit is almost double what it was 12 months ago. This confidence, coupled with positive views on the global economy and sound economic fundamentals, will accelerate deal-making.
Debt-to-capital ratios have been carefully managed
Over the last six months, debt-to-capital ratios remained largely constant while access to credit continued to improve. This disciplined use of leverage ensures companies have the capacity to access the credit markets as they undertake larger transactions.
Planned use of more debt and equity signals shift to larger deals
The confidence to use more debt and equity to finance deals represents a shift away from risk aversion and smaller, cash-based transactions. The use of more leverage also highlights the need for larger deals to address growth mandates — and signals the return to a more active M&A environment and larger transactions.