Increase in M&A deals to drive local pipeline
Despite geopolitical uncertainty and disruption, the 16th Global Capital Confidence Barometer finds Australasian corporate executives remain optimistic about global and local economic conditions. More than half of local respondents (56%) expect to pursue M&A in the next 12 months.
The consensus seems to be that, while the road ahead may be bumpy, corporates are being driven to actively pursue acquisitions in competition with active private equity investors.
Strong deal making opportunities on the horizon
Deal making is set for a strong 2017 with high confidence in the M&A market and healthy pipelines. Valuations are improving and the likelihood of closing remains high.
Confidence in closing acquisitions at a local level has improved in the last six months. More than half (53%) of the deals planned in the next 12 months are valued at less than US$250m, as companies look to undertake bolt-on deals to grow their businesses.
Deal pipelines will also remain healthy: almost three in five (59%) of respondents have three or more deals in their pipeline. The majority of respondents (89%) expect these numbers to increase or remain stable.
Organic and inorganic growth top of business agenda
In the search for growth, future proofing remains an ongoing challenge.
Australian and New Zealand boardroom agendas are being dominated by the impact of digital technology on business models, the search for growth and sector convergence.
Currently, companies are investing the bulk of their attention and resources on organic (e.g. investing in products, R&D, talent, innovation, digital) and inorganic (e.g. acquisitions, alliances, and JVs) strategies.
Capital allocation, optimising balance sheets and improving working capital management are less of a priority in the current environment.