5 minute read 26 Jun 2019
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Optimism fuels growth aspirations and M&A outlook in Greece

By

Andrea Guerzoni

EY EMEIA Transaction Advisory Services Leader

Advising Boards and CEOs on transformational deals from strategy through to execution. Leader of the EY EMEIA Transaction Advisory Service line. Innovator and team player.

5 minute read 26 Jun 2019

Greek executives are feeling positive about the state of the economy, their M&A outlook and their prospects for organic expansion.

Government reforms, cooperation with the rest of the EU nations and the successful return to sovereign debt capital markets have Greek executives feeling much more positive about the state of global and local economies, their M&A outlook and their prospects for organic expansion.

According to the latest EY Global Capital Confidence Barometer, 75% of Greek executives indicate that the global economy is improving, while 88% have confidence that the local economy is on the rise. This is significantly higher than the 54% who expressed a similar sentiment 12 months ago. We expect that steady GDP and sector growth over the past two years are contributing factors in their rising optimism.

Strong levels of confidence across a range of macroeconomic fundamentals support these findings, as Greek executives express a bullish outlook about corporate earnings, short-term market stability and credit availability.

Macroeconomic outlook

88%

of Greek executives express confidence that the local economy is improving.

Based on their optimism, 88% of Greek executives anticipate growth rates between 6% and 15% in the coming year.

Greek executives may face different challenges to growth than their global peers but their strategic priorities are the same

As optimistic as Greek executives are, they are mindful of the potential risks that may lie ahead. A higher percentage (38%) see slowing economic activity as the greatest external risk to the growth of their business than their global peers (33%).

Within their own organization, Greek executives deviate from their global peers in identifying significant challenges to their own company’s growth. Where global executives cite increasing production costs as their chief concern, Greek executives are more focused on attracting talent, slowing demand and access to capital.

However, Greek and global executives are on the same page when it comes to strategic growth priorities. Greek executives are slightly more interested in developing more products and services than their global peers but are in lockstep in terms of expanding existing business domestically and in adjacent sectors.

M&A appetite remains healthy

As a key tool in their growth arsenal, 54% of Greek executives expect to pursue M&A in the next 12 months. In the last two years, more than half of Greek executives anticipate their companies to actively pursue M&A in the upcoming year. Based on the most recent M&A survey results, they see continued room for growth, with 85% indicating that they see the local M&A market improving in the months ahead.

Almost three-quarters (73%) of Greek executives expect to look abroad for their dealmaking, with the UK, Greece, the US, Germany and the United Arab Emirates appearing to be their preferred destinations.

Buying an asset is one thing, but the process of realizing its value can turn an opportunity into a risk. Post-M&A, Greek executives are particularly attuned to the risks integration of operations and people can pose, with 30% citing it as their biggest challenge.

M&A appetite

54%

plan to pursue M&A in the next 12 months.

Greek executives plan significant investments in technology

Although Greek executives see M&A as a means to fast-track some of their strategic growth objectives, 78% expect the majority of their growth to be organic in the next 12 months. Following years of cost-cutting and consolidating, they want to focus their efforts on maximizing the value of what they have — and they see technology as a key means of achieving it.

Every single Greek executive surveyed says their company will significantly invest in technology across a range of priorities, including improving internal efficiencies; improving financial data access and analysis; improving the customer experience; and reducing risks (including cyber risks).

Given that talent poses one of their key challenges to growth, it’s of little surprise that nearly one in five Greek executives say they’ll be focusing their automation and AI efforts on better talent recruitment and onboarding. They also want to use these technologies to increase personalized products and services, and improve customer service. For both of these efforts, a substantial majority indicate they’ll be developing their capabilities in-house.

Greek companies understand more than most the need to build resilience

While Greek companies are striving to achieve their growth objectives, after a prolonged recession, they understand more than most the need to build resilience and plan for the risks that may lie ahead. As such, one in five Greek executives say they are primarily focused on improving capital structure and investing in capital expenditures and talent, respectively. At the same time, 44% say they will be concentrating on reducing overhead and administrative costs to improve profitability and cash flow.

Corporate and portfolio strategy

44%

expect to focus on reducing overhead and administrative costs to boost cash flow and profitability.

More Greek executives indicate they are also increasing the frequency of their portfolio reviews, although they are more likely to review their portfolio every six months or quarterly. However, more global executives now review their corporate portfolios quarterly.

Meanwhile, while activist shareholders seem keen for Greek companies to divest assets, as a result of their last portfolio review, 40% of Greek executives say they differentially invested capital in a specific business unit.

Portfolio reshaping will continue in the months ahead

As we look ahead, in the short term Greek executives will continue to keep an eye on the ongoing economic and political uncertainty and maintain a level of diligence in reshaping their portfolios so they are fit for the future.

Looking beyond a six-month horizon, Greek executives understand that governance and societal and environmental issues are paramount to long-term value creation.

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

Andrea Guerzoni

EY EMEIA Transaction Advisory Services Leader

Advising Boards and CEOs on transformational deals from strategy through to execution. Leader of the EY EMEIA Transaction Advisory Service line. Innovator and team player.