M&A appetite among Greek executives reaches an all-time high

Political stability and lower unemployment rates have Greek companies feeling confident about future growth and M&A.

Political stability, increased inflow of foreign investment, a drop in unemployment levels, improvements on the banks’ balance sheets and the successful return to the sovereign debt capital markets are preserving the confidence of Greek executives. According to the EY Global Capital Confidence Barometer, 62% of Greek respondents see the global economy as growing, while even more — 73% — are feeling positive about local economic growth.

Broad-based confidence in domestic corporate earnings and short-term market stability are further fueling their optimism, as are modest increases in key financial metrics such as profitability.

It’s a trend Greek executives expect will continue, with 57% anticipating modest to strong increases in revenues and 42% expecting a rise in profit margins over the next 12 months. At the same time, 66% predict that input costs, excluding employee costs, will stay the same or modestly decline in the coming year.

Regulatory and geopolitical uncertainty raise concerns

Despite their confidence in the growth potential of the global and local economies in the next 12 months, a majority (55%) of Greek executives foresee an economic slowdown. Of these, 77% see it occurring by 2021 or earlier.

Key issues raising these concerns include geopolitical and political uncertainty, as well as regulatory uncertainty, supply chain disruption and new environmental policies. Concerns related to political and regulatory uncertainty primarily stem from the political upheavals of the last five years, combined with tensions in the Southeast Mediterranean.

However, where global respondents are taking more of a wait-and-see attitude toward external uncertainties, Greek companies are more inclined to act. Nearly one in five (18%) Greek respondents say their companies are moving offices and management into or out of certain countries. Other options they’re weighing include reconfiguring their supply chains (16%) and reducing outsourcing (15%).

M&A appetite reaches an all-time high

Riding the wave of confidence in their growth prospects, an all-time-high 62% of Greek executives say they will be pursuing M&A in the next year. Meanwhile, their M&A outlook remains positive but more moderate than a year ago, with 56% expecting the domestic M&A market to improve in the next 12 months (versus 83% in October 2018).

Respondents expect to target assets that offer transitional capabilities, including digital technologies and new routes to customers. However, they are expecting competition, primarily from private capital, which could drive up valuations.

Greek companies pursue new growth opportunities in digital and technology

With 75% agreeing or strongly agreeing that there will be an increase in cross-sector M&A driven by technology and digitalization, Greek executives recognize the impact digital transformation is having across organizations, sectors and markets.

Over the next two years, the biggest impact they see revolves around increasing competition (30%) and changes in customer behaviors (29%). In terms of specific technologies, where global respondents see AI and machine learning (26%) as well as automation and robotics (20%) having the most significant effect on their businesses, Greek executives are more focused on the impact they face based on the advancements of analytics (28%) and 5G (20%).

In response, Greek executives are split in their approaches, with 46% focusing on internal investments (in-house development and through internal corporate venture funds), while 50% say they will consider external investment opportunities (M&A, external venture funds and JVs, and alliances) to fund their digital transformation objectives. More than half (51%) say they will allot 25% or more of their total investment capital to digital and technology, with 69% of those saying their focus will be on new growth opportunities (versus operational efficiencies).

Talent crunch may slow growth plans

Greek companies may find talent their biggest stumbling block in achieving their growth plans — digital or otherwise — with 70% of Greek executives admitting that their companies are struggling to hire and retain staff. Of those, 46% say they are having a hard time finding talent with specific technical skills relevant to their core business, while 21% are challenged to attract digital and technology specialists. 

Executives look beyond shareholders to define long-term value

As purpose moves to the heart of business strategy, Greek respondents have, or are planning to adopt, a range of reporting that goes beyond that which focuses solely on financial and shareholders.

Political and social pressure on companies is rising. The need for corporates to show that they are good members of society and are adding value to their people, customers and society has never been greater. As a result, as Greek companies look ahead, 81% already have in place or will be adding metrics to measure talent. At least 77% will be looking to measure their social performance to generate long-term value, so that they can communicate to investors, internal stakeholders and society.