6 minute read 20 Nov 2019
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Australasian executives confident on M&A despite disruptive pressures

By David Larocca

EY Oceania Strategy and Transactions Leader

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

6 minute read 20 Nov 2019

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  • Global Capital Confidence Barometer – Edition 21 (pdf)

Despite anxiety about economic conditions, M&A emerges as a crucial tool for Australasia in the corporate response to digital disruption and rapidly evolving technologies. 

The 2019 EY Global Capital Confidence Barometer has landed, bringing with it a wealth of insights into the state of play, both global and local, into the economy, key topics in corporate boardrooms and, of course, appetite for M&A.

“It’s a compelling view of the sentiment around deal-making, key strategic issues being discussed in boardrooms and the outlook on economic conditions,” says David Larocca, EY Oceania Managing Partner, Strategy and Transactions, of the report which surveyed 2,900 executives in 45 countries including executives from 170 Australian and New Zealand companies. “It gives a perspective on the mood in the market globally, as well as here in Australia and New Zealand, about how executives are feeling about the economy and their intent to undertake M&A,” he says.

The following themes are coming through for Australia and New Zealand from the 21st edition of the M&A survey.

Economic outlook slips but still strong

There is a slight downward shift in the domestic economic outlook as 65% of respondents from Australia and New Zealand are expecting domestic economic growth to accelerate, compared to 74% in 2018 – a drop of 9 percentage points (expectations of the global economy have also taken a similar hit). At the same time, confidence in stability has risen, from 24% in 2018 to 28% in 2019. 

Taken as a whole, these figures reveal stable confidence in the market, Larocca says.  “Relatively speaking there’s been a bit of a dip, but the economic outlook remains pretty solid. More than 90% are still saying they expect the local economy to remain stable or grow, and the majority (82%) are saying their views have stayed the same or modestly improved in the last six months. It’s still probably a muted mood rather than a downturn mood that’s coming through in these results.”

Local economic growth


of Australasian respondents expect the economy to remain stable or grow.

Appetite for M&A tracks above average

At first glance, expectations of M&A are trending down, with only 47% of respondents from Australia and New Zealand expecting improvement in the market compared with 73% in 2018. 

But as we dig deeper, a more upbeat mood emerges, and plenty of action is in the offing. In Australia and New Zealand, 53% of respondents intend to undertake M&A in the next 12 months – tracking substantially higher than the average of 44% since 2010. Over the next 12 months, 53% of respondents expect their M&A pipeline to increase (up by 3 percentage points on 2018) and 62% expect deal completions to increase (up by 2 percentage points).

M&A survey Australasia M&A expectations

“The survey is telling us executives are responding to the pressure to grow or defend their market position against the challenges being posed through digital and technology – and M&A is forming part of this strategy,” Larocca says.

Acquiring technology, new production capabilities or innovative start-ups (23%) are at the top of the list of deal motivations, equalled by acquiring talent (23%); and followed closely by finding gateways to new markets (22%). 

From a sector perspective, we can expect more activity in technology, advanced manufacturing and life sciences. The top investment destinations are Australia, New Zealand, US, UK and Germany.

M&A survey Australasia strategic drivers for pursuing acquisitions

Technology and automation trigger deal-making

“Despite an up-tick in concerns about economic conditions, there is still strong intent to undertake M&A,” Larocca says. “We think it’s a response to technology and disruption.” 

Local respondents believe automation is set to have the greatest impact on their businesses over the next two years. The unrelenting pace of technological change makes acquisition a fast way to gain capacity and generate growth opportunities. “Executives are going outside of their sector to acquire technology and respond to disruption through M&A because they need to do it quickly.”

Sixty-six percent of Australian and New Zealand respondents expect cross-sector M&A driven by technology and digitisation, compared to 75% globally. There is a strong local preference for bolt-on acquisitions (70%) by local firms to expand market share. “Our global counterparts, perhaps a little further along the tech transformation path than the locals, are using M&A to expand capability,” Larocca says.

Many companies are striving to embed an effective culture of digital innovation. Globally there is a persistent push to spread this function throughout the entire business, with only 49% of companies siloing it under a CIO or CTO. But in Australia and New Zealand, 60% of companies intend to, or are, centralizing the function. 

This presents challenges for businesses around adopting new technologies quickly and indicates a barrier to activating data-driven opportunities. On the other hand, those firms that get it right will be well placed to seize opportunities as they are presented.

M&A survey Australasia company culture for digital innovation

Private equity in the spotlight

Waiting in the wings is private capital. “There’s been significant private equity activity in Australia and New Zealand in the past 18 months or so and its significance continues to rise,” Larocca says.

Private equity


of Australasian respondents expect private equity to be a major acquirer of assets in the next 12 months.

Globally, 75% of respondents agree or strongly agree that private equity will be a major acquirer of assets in the coming 12 months, whereas in Australia and New Zealand this figure is considerably higher, with 83% anticipating activity from private capital. "In this environment, businesses should be prepared to face substantial competition for high-quality assets," Larocca notes.

This reinforces the point that businesses should be prepared to face substantial competition for high-quality assets in the coming months.

Outlook healthy for profitability and sales

While the survey reveals some loss of confidence in the economy, there is nonetheless a strong bias among companies in Australia and New Zealand toward their own successful performance: 97% of respondents expect their profit margins to increase or stay the same over the coming year; and 97% expect sales/revenue to increase or stay the same. 

And despite the anxiety around automation and digital disruption, when asked to consider the potential challenges to this anticipated growth, the top three concerns that emerged were: increasing competition from existing competitors (17%); internal inertia (16%); and shortage of talent or skills (13%).

M&A survey Australasia challenge to own company’s growth plans

Focus on governance

For the first time this year the survey included questions on performance measurement. It’s clear that companies are taking a much broader view, beyond just the financials, on what “good looks like” – 88% of companies already have in place or plan to introduce metrics for measuring customer value, 85% for measuring social value and 82% for measuring talent value.

“Management is under increasing pressure to generate long term value that goes beyond just delivering returns for shareholders – creating long-term value for customers, employees, and society as a whole. They are under pressure to act on global challenges from a broad group of stakeholders and need to be able to articulate how they are doing this,” concluded Larocca.


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 David Larocca

EY Oceania Strategy and Transactions Leader

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