2 minute read 7 Nov 2018
chess board

M&A appetite resilient amid geopolitical uncertainty

By

David Larocca

EY Oceania Transaction Advisory Services Leader

Knowledge leader in infrastructure. Vocal diversity and inclusion advocate. Keen cyclist.

2 minute read 7 Nov 2018

Australian and New Zealand dealmakers focus on portfolio reviews and unlocking synergies despite geopolitical uncertainties.

This article is part of our M&A report Global Capital Confidence Barometer, 2nd half 2018.

Our 19th Global Capital Confidence Barometer finds Australian and New Zealand executives expecting the M&A cycle to continue at elevated levels. An unprecedented 99% believe the local M&A market will remain stable or improving, with more than 92% expecting more or the same number of deal completions in the next 12 months compared to last year.

M&A outlook

92%

of executives expect more or the same number of deal completions in the next 12 months compared to last year

More than half (53%) plan to actively pursue M&A in the next 12 months – significantly above the long-term average of 43%. Nine in ten respondents expect their M&A pipeline to either increase or stay at the same level in the next 12 months.

Yet, their global counterparts have a less rosy market outlook. While respondents expect heightened levels of M&A, there is a decline in the percentage that expect to make acquisitions themselves in the next 12 months, with plans for M&A trending down to 46%. This puts global M&A appetite at the lowest point for four years, signaling that some global executives are looking to other companies to do the dealing rather than acquire themselves.

We have seen this dichotomy before in our survey. This is an indication that we will likely see a temporary pause in activity outside of our market. And it may be an important signal for the local Australian and New Zealand markets, which tend to lag global sentiment.
 

Biggest threat

56%

of executives believe geopolitical risks pose the biggest short-term threat to dealmaking

Overseas, regulatory and trade policy uncertainty is clearly giving some executives pause for thought, as is the need to fully integrate and properly digest acquisitions made to date.

Locally, a third of executives are now concerned about the implications of geopolitical risk on business growth. A year ago, only 16% said political uncertainty was a prominent feature in boardroom thinking. They also cite regulatory or government intervention as the primary reason for failing to complete or cancelling an acquisition.

Will local resilience in Australia and New Zealand continue? Or are we heading for a pause in M&A appetite for dealmaking as local executives follow the global trend?

Summary

Our 19th Global Capital Confidence Barometer finds Australian and New Zealand executives expecting the M&A cycle to continue at elevated levels. An unprecedented 99% of respondents believe the local M&A market is stable or improving, with more than 92% expecting more or the same number of deal completions in the next 12 months compared to last year. Download the full report here (pdf).

About this article

By

David Larocca

EY Oceania Transaction Advisory Services Leader

Knowledge leader in infrastructure. Vocal diversity and inclusion advocate. Keen cyclist.