After a sustained period of elevated M&A activity across the CESA region over the last several years, CESA countries appear to be taking a breath amid ongoing regulatory and geopolitical uncertainty. However, they remain optimistic about the future of M&A in their region, according to the results of the latest Capital Confidence Barometer.
Down from the year before when deal intentions hovered above 50%, but similar to our survey results six months ago, 38% of CESA executives say that they expect to pursue M&A in the next 12 months.
Overall, we see this reduction in appetite for M&A as more of a pause than a full stop, as sentiment toward M&A in CESA remains strong, with 85% of executives seeing the M&A market improving in the coming year (vs. 47% in October 2017). This outlook was most positive in the Czech Republic, where 90% of respondents expect an improvement.
Similarly, even though CESA companies may not be pulling the trigger on deals in the next 12 months, they are making sure their pipelines are full.
Portfolio reviews identify opportunities for both divestitures and acquisitions across CESA
We also see that CESA companies are taking this opportunity to reshape their portfolios and refuel themselves for the next round of buy-side activity.
Given ongoing geopolitical uncertainties, changing consumer preferences and a host of other disruptive forces, three-quarters of CESA executives are reviewing their portfolios every six months or more. This percentage rises to 81% in the Czech Republic. These reviews help them to understand the potential for policy changes that may disrupt their businesses and improve their agility to respond to changing conditions as they arise.
As a result of their most recent portfolio review, 69% of CESA companies have identified assets to divest, either because they are underperforming (41%) or because they are at risk of disruption (27%).
- In the Czech Republic, executives ranked the need to make acquisitions as equally or more important than divesting to address disruption.
- In Greece, 24% indicated that they didn’t take any action based on the outcome of their portfolio review.