This Goldilocks result — not too hot, not too cold — well captures sentiment among CFOs and CDOs we advise. A prolonged US bull market, marked by historically high equity and asset valuations, may not be ready for a correction quite yet, but corporate leaders are quietly building the ark before the rains come.
This fortress-building often takes the form of deal integration — a prudent digestion phase after the M&A boom enlarged companies’ portfolios in the mid-2010s.
- If we were to phrase this in terms of EY’s Capital Agenda framework, US leaders who a year or two ago were firmly in the “Investing” quadrant are now gravitating toward “Optimizing.”
- These decision-makers know from experience the cost of getting it wrong: 62% tell us their last integration generated lower synergies than expected. More than half (56%) tell us they are starting integration planning earlier.
Just as it is hard to tell where markets or the news cycle are headed day to day, we can only speculate about where this corporate watchfulness will lead. It might even spur a renewed overseas focus — a sizable minority (21%), concerned about trade and tariffs, tell us they are taking another look at cross-border M&A. Yet the countries US dealmakers are targeting are relatively close to home, favoring Latin America over Europe, particularly in light of Brexit. This focus on the Western Hemisphere mirrors executives’ emphasis on optimizing their own portfolios. You might say that, at a time when trade barriers are on the rise, protectionism starts at home. And 10 years after the last financial crisis, US business leaders with long memories are keen to shore up the edifice they have built.