French M&A intentions reach a nine-year high

Confident French executives actively pursue M&A to meet ambitious growth objectives.

According to the latest EY Global Capital Confidence Barometer, French executives are feeling more confident than they did a year ago about the French economy, their growth plans and their pursuit of M&A to help them achieve their goals.

The M&A survey results indicate that 95% of French respondents expect the global M&A market to improve in the next 12 months, a marked improvement from 43% 12 months ago. Based on their optimism, 74% say they plan to actively pursue M&A over the next 12 months — a nine-year high, and considerably higher than global respondents (59%).

Of those looking to acquire, 67% say they are looking beyond their own borders for assets; 68% say they would consider an acquisition to secure their supply chain. French executives cite the UK, France, Germany, the US and China as preferred destinations.

With M&A helping to fuel growth plans, more than half (55%) of French executives say that their companies will be able to achieve growth of 11% or higher in the coming year. However, although M&A features prominently in strategy growth plans, 72% say that organic growth will remain the main growth driver.

Competing allocation priorities and activist shareholders have French companies reshaping their portfolios

French executives cite a number of competing capital allocation priorities, including returning capital to shareholders, improving capital structure and transformational investment in digital and technology. This focus on their own ecosystem through a variety of lenses (digital, geopolitical, economic and demographic) should help French executives to pivot as markets evolve.

Meanwhile, almost all French executives (97%) say that activist shareholders are placing increasing pressure on their companies to reshape their portfolios. For 40%, the priority is on reconfiguring operations or expanding their geographic footprint, while 60% are being pushed to either acquire or divest.

Based on the activist pressure they are receiving, as well as the disruption most companies are experiencing, almost three-quarters (72%) of French executives say they are reviewing their portfolios every six months or more. As a result of their most recent review, one-third (33%) differentially invested capital in a particular business unit.

Looking ahead, French executives will focus on acquiring technology and addressing convergence

With 95% perceiving that the local economy is improving, French executives remain positive about their ability to reach their growth targets in 2019. With the impact of technology and transformation, and the threat of digitally enabled competitors and sector convergence sitting atop their business agenda in the next six months, 44% of French executives say they will focus their M&A efforts on acquiring technology or innovative startups and growing into adjacent businesses.

At the same time, they will be looking to build resilience into their company’s cash flow by reducing overheads and administrative costs.