Global technology executives to accelerate growth strategies in 2014 as confidence reaches two-year high and access to capital improves
New York, 22 November 2013
- 68% of executives surveyed say the global economy is improving
- 77% expect of M&A deal volume to improve
- 33% expect to pursue an acquisition compared with only 20% a year ago
Sixty-eight percent of technology executives believe the global economy is improving, with another 20% indicating the economy is stable. This points to the greatest confidence in the global economy in two years, according to EY’s ninth bi-annual Technology Capital confidence barometer, a survey of 1,600 senior executives in 72 countries, including 181 executives from the technology sector. Just six months ago, only a little more than half of respondents believed the economy was improving.
According to the survey, growth is clearly a global imperative for technology companies as 68% of executives say they plan to accelerate growth strategies over the next 12 months. After several years of uncertainty, the report notes that companies have strengthened their balance sheets and largely optimized their capital structures. Companies are increasingly ready to capitalize on the improving global economy and credit markets to implement their growth agendas.
With core fundamentals in place to support technology M&A, 33% of technology executives surveyed expect to pursue an acquisition, compared with 20% a year ago. This 65% improvement in the number of companies expecting to pursue acquisitions resonates from the notable increase in the last 12 months in an improvement in the number and quality of opportunities and the likelihood that deals will close.
Joe Steger, EY’s Global Technology Industry Transaction Advisory Services Leader, says:
“We are seeing a renewed focus on growth, but with a cautious optimism around M&A that comes, no doubt, after several years of economic uncertainty. Many technology companies have been focused for several years on doing more with less — basically, becoming more streamlined and efficient. Now, with increasing pressure on corporate earnings, they need to grow the top line.”
The report identifies the following key trends.
- Confidence in global economy is at two-year high. Sixty-eight percent of technology executives believe the global economy is improving compared with 54% six months ago. Executives who see the economy declining fell from 13% in April to 12% in October — the lowest in more than two years.
- Job creation underscores growth. Technology respondents’ commitment to job creation is at the highest level in two years and highlights that companies need to hire as they prepare for the coming wave of growth. At 57%, job creation expectations for technology companies are up from 41% six and 12 months ago.
- Credit is widely available, but cash is on the rise to finance technology deals. The vast majority of technology executives now consider credit availability either stable or improving, as the sentiment on improving credit is almost double what it was 12 months ago. However, the percentage of technology companies planning to use cash to finance deals is increasing compared with 12 months ago, reflecting confidence in overall economic growth.
- Valuation gaps expected to widen. As transaction volumes accelerate, there is a natural divergence between buyers’ and sellers’ expectation on pricing. Recent strong stock market performance has helped increase this gap. Forty-five percent of technology executives expect valuation gaps to widen over the next 12 months versus 18% six months ago, or 2.5 times higher. This widening gap results from buyers and sellers adjusting their expectations at different rates.
About the reports
The EY Technology Capital Confidence Barometer is a survey of 1,600 senior executives in 72 countries, including 181 executives from the technology sector. The objective of the Barometer is to gauge corporate confidence in the economic outlook, to understand boardroom priorities in the next 12 months, and to identify the emerging capital practices that will distinguish those companies that will build competitive advantage as the global economy continues to evolve. The full report is available at Technology Capital Confidence Barometer.
EY’s Global Technology Center
The technology industry is in a constant state of change – driven by continuous innovation, shifting markets, converging industries, consumer demand and the need for first-mover advantage. EY’s Global Technology Center connects a worldwide team of more than 15,000 technology professionals to help you navigate the challenges of this continuous change. We provide assurance and tax guidance through a network of experienced advisors to help you manage risk, transform business performance and sustain improvement. We can help you deliver cost-effective innovation, balance product portfolios, maintain effective supply chains, and identify, execute and integrate strategic growth transactions. Our global technology network leverages our leading market share position in serving technology companies to provide you with timely, reliable information. Our teams use a cross-discipline, collaborative approach to help you achieve your business objectives. We encourage our people to use their ingenuity and initiative to help you develop approaches, create options and seize opportunities. It’s how EY makes a difference.
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.