April 2014

EY Australasia Capital Confidence Barometer

Recipe for sustainable growth

Key findings

Economic outlook: confidence builds across all indicators

Access to capital: new appetite for credit

Growth strategies: balanced and disciplined

Mergers & acquisitions: nearly one-third expect to pursue acquisitions

EY - Capital Confidence Barometer
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“All the ingredients are in place to support a robust transaction environment, but growth will be steady and controlled.”

In this, our 10th six-monthly Australasia Capital Confidence Barometer, we can see real progress as confidence gradually builds in the local and global economies. Across almost every indicator, the results are painting a steadily improving picture. Economic optimism is strong and more companies are confident about future earnings. Credit is available and corporate appetite for debt is returning, with 45% of companies intending to primarily finance deals through debt and gearing levels beginning to increase. Deal volumes are expected to grow; valuation gaps are shrinking. 

M&A market warming up

As a result, 32% are planning an acquisition in the next 12 months and 56% of companies are planning to generate more than a quarter of their anticipated growth through acquisition, with deal pipelines improving correspondingly.

Yet, the M&A market is still in recovery. More than a quarter of our Australasian respondents remain focused on cost efficiency, not growth.

Exercising caution to optimise acquisitions

The prevailing attitude is one of disciplined optimism. Local companies have learned the lessons of the GFC. They are focused on growth, but they are also sustaining their cost focus and taking a cautious approach to capital management, ensuring they optimise an acquisition before focusing on the next deal. This will deliver better returns to shareholders, who are an increasingly powerful influence on corporate strategy. It will also prevent the market from overheating.

Steady and controlled growth

In short, this edition of the Barometer tells an encouraging and sustainable story.

All the ingredients are in place to support a robust transaction environment. But growth will be steady and controlled.

The local M&A market is starting to warm up. Buyers should be increasingly confident they can get deals done, and sellers can look forward to a warm reception when they take quality assets to market.

EY - Graeme Browning Graeme Browning

Managing Partner,
Transaction Advisory
Services Oceania