Most respondents are planning to increase investment in R&D, capex, M&A, and through corporate venture capital. Across these measures there has been a decline from the supercharged investment cycle that began in July 2020 and slowed significantly after June 2022, with 2021 being a record year for M&A and corporate venture capital, and with higher-than-average growth in R&D and capex spend. These investment levels declined in 2022 and are still to recover. But CEOs are signaling a return to higher levels of investment as uncertainties about monetary policy decrease. With markets now accepting a higher-for-longer rate environment, inflation pressures recede, and the growth outlook becomes clearer, even if at lower levels.
There is a clear difference in intentions between those anticipating higher growth in 2024 than their peers. Across all verticals, more bullish CEOs are planning to invest at higher levels, which will likely boost their advantage even further. As with investments in GenAI initiatives, those companies anticipating lower levels of growth should acknowledge that falling behind in investment now will mean they fall further behind overall. They need to keep pace with more agile competitors. And that will require hard choices to fix, sell or close unprofitable parts of the portfolio, or to exit particular markets.
The wider M&A market has firmly stabilized after the slow first quarter of 2023. The market is currently seeing roughly US$200b–US$250b of deals each month, with about 250 deals of more than US$100m announced.
Expectations are for this to continue. There could also be an uptick in more significant deals, as CEOs become more comfortable with the new environment. Average deal values have been increasing through 2023, and there are recent signs of even larger megadeals in the pipeline.
The survey finds a clear majority of CEOs (89%) are planning some form of transaction over the next 12 months. But there has been a sharp contraction in intentions to actively pursue acquisitions in the next 12 months, dropping from 59% in July to 35% in October. The major focus is now on joint ventures and strategic alliances, and divestments, which has remained steady since July, indicating a desire to reassess portfolios as well as being boosted by the reopening of initial public offering (IPO) markets.
There are also more CEOs allocating capital to their M&A budgets than are expecting to actively pursue acquisitions in the next 12 months, which points to companies building their reserves in anticipation of the right acquisition target.