US executives are facing the most complex markets ever.
One consistent observation through eight years of our Capital Confidence Barometer is that executives, particularly in the United States, gravitate toward certitude. That’s why the word “confidence” is in the title of our study; when companies feel assured, they are more likely to pursue mergers and acquisitions and other bold measures to grow their business.
A few months into 2017, our US respondents find their confidence buoyed — ironically, even as they are contending with greater macro tumult than ever. When we last surveyed them, in October 2016, the US presidential election was several weeks away. The outcome of that contest surprised observers across the business community, on both sides of the political aisle and around the world. And since taking office, the new US administration has spurred debate on many economic and market precepts, from trade to taxes to talent.
In this survey, however, we find US executives solidly optimistic, both about the economy and about their own prospects under a new political order. For them, the certitude of a clear doctrinal direction trumps the day-to-day debate. Two thirds say the global economic picture is improving, and more than half say the US economy is improving — both percentages greater than they were six months ago. US deal intentions remain historically high (79%), slightly higher than the record US M&A intentions of 75% we recorded in October. This sets the stage for another very busy year for dealmaking.
This resilience among US executives can be attributed to the ever-broadening canvas against which they must operate. For the modern US C-suite running a globally minded, innovation-hungry business, complacency is not an option, as the half-life of any strategy shortens and every asset must work to its maximum capacity.
Indeed, the key word for US companies right now is not so much “deal” as “portfolio” — executives and boards are more focused on their mix of assets than ever, with nearly 90% in the US telling us they have stepped up portfolio review. We have been hearing for some time that companies recognize the need to pare back non-core holdings, and this mindset is showing up in our survey and in the meaningful increase in new deal activity we’ve seen since the start of 2017.
Without a doubt, politics and economics will continue to throw curveballs at the markets for the rest of the year, especially as prospects for serious legislative reform grow cloudier. US companies, however, have already priced in such turmoil as they pursue their own, more specific goals: staying relevant, finding growth and expanding their market leadership.
EY Americas Vice Chair
Transaction Advisory Services
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Download US highlights (PDF)Press release: Amid Geopolitical Uncertainty, US Executives See Positive Deal Environment and Economic Upturn, EY Survey Finds