How can you reshape your future before it reshapes you?

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.

3 minute read 15 Apr 2019

Reshape. Reimagine. Reinvent. How your M&A strategy should safeguard growth for tomorrow and beyond.

The first EY Global Capital Confidence Barometer was launched 10 years ago in the wake of the Global Financial Crisis (GFC). At that time, the survey results reflected the great unease across the markets. We again find ourselves in a period of uncertainty. Though nothing like the magnitude we experienced a decade ago, we don’t need to look far to find negative headlines and speculation about an economic downturn.

However, the one major difference between now and then is how the C-suite views uncertainty. Ten years ago, boardrooms were paralyzed by uncertainty. Today they are motivated by uncertainty. The boardroom of 2019 is concentrating on proactively managing risks and seizing the upside opportunities of disruption.

Which is why we find global executives more bullish in their outlook than many economic and business commentators — they are building resilience into their operations while, at the same time, laying the foundation for future growth in three key ways.

  • Reshaping results — instilling financial discipline while realigning portfolios — optimizing strategic, operational and commercial performance to future-proof growth
  • Reimagining their ecosystems — looking at more innovative business models and collaborations to access new markets and customers
  • Reinventing their future — learning from the past while envisioning the future in a digitally enabled, hyper-speed world

For the majority of our respondents, the fastest way to achieve this transformation is through M&A. The Barometer has been a reliable guide to the M&A market over this post-GFC decade. It has correctly predicted the direction of sentiment and highlighted the key drivers of deals. A record number of executives are now looking to transact in the next 12 months and, unforeseen events notwithstanding, the outlook for dealmaking is strong.

Those executives who balance the risks and rewards of M&A will be best positioned to reshape their companies for a better tomorrow.

The chart below demonstrates the consistent accuracy the Barometer has predicted of global M&A activity.

The top 10 critical questions executives should consider to drive better M&A in today’s deal economy

1Can you reshape your portfolio quicker than your industry reshapes around you?

Executives should determine the relationship between their ecosystem and an evolving industry landscape to better position themselves for emerging growth opportunities.

2Is the missing link in your data your own?

Companies should use their own internal data and a range of differentiated external information to highlight potential growth markets rather than assume headline economic activity is a reliable guide.

3Tariffs, trade or business as usual?

Executives should factor in changing trade patterns, but not allow them to significantly alter strategic direction.

4Do you need to look in a different direction to see more clearly?

Companies should take both inside-out and outside-in views to understand how investors and others perceive them.

5Developed, emerging or your own unique market?

With technology enabling an increasingly bespoke service, executives should strive to have resources laser focused on attracting and retaining customers.

6Will automation alleviate margin compression?

With input prices rising, executives should accelerate their automation journey to reduce costs and maintain earnings growth.

7Are you creating your own liquidity trap?

Executives should challenge the status quo and constantly stress-test their treasury and working capital processes to maximize liquidity and free up capital for reinvestments.

8Do you know the next big thing in your industry?

With traditional sectors recast, executives should build information and intelligence sources to continually track emerging competitors and technologies that may undermine their business models.

9How can you bridge the gap?

With traditional valuation models not always able to fully assess new business models and technologies, executives should utilize more advanced modeling techniques and model a wider range of scenarios for key input assumptions.

10Can you articulate your social value?

With societal issues elevating risks for businesses, executives should be able to articulate a compelling narrative of how their purpose goes beyond profit and how their M&A fulfills purpose.

Summary

The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.

About this article

By

Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.