At a time of heightened geopolitical uncertainty and rapid change, the global outlook for M&A continues to grow nonetheless, according to EY's 15th Global Capital Confidence Barometer (CCB), a survey of more than 1,700 business leaders in 45 countries. More than half (57%) of companies surveyed expect to do business in the next 12 months, the second-highest percentage recorded in the Barometer's 7-year history. More than 90% of executives expect the M&A market to improve or remain stable over the next year, and less than 10% see their pipelines contract over the same period. In addition, joint ventures, alliances and other forms of investment are expected to complement acquisitions and drive incremental growth.
As for our country, "Italian companies are experiencing a further phase of M&A - comments Marco Mazzucchelli, EY Mediterranean Transaction Advisory Services Leader - driven by a growing competitive scenario with the entry of new unexpected players also from adjacent sectors, by the continued rapid spread of digitization and a growing understanding of the related impacts on business models and the need to transform into global businesses”.
INCREASE ATTENTION TO MIDDLE SIZE M&A
"Mega deals" remain a strategic option for companies, but the M&A trend is mainly aimed at smaller and more targeted deals, with the aim of reaching an ever-widening network that includes start-ups and fast-growing technological innovators . According to the Barometer, half (49%) of companies have on average more than 5 deals pending and more than half are confident of closing deals between $250 million and $90 billion. More than 12% of executives expect their pipelines to stay stable or improve over the next XNUMX months.
THE COMBINATION BETWEEN SECTORS IS INCREASINGLY RELEVANT
The merger and combination between sectors is an increasingly important part of the M&A landscape, given the ever greater penetration by companies into adjacent or independent segments, also influenced by the continuous changes in the competitive scenario caused by digitalisation. The conclusions showed that the most cited factor by companies for cross sector acquisitions is competition (19%), followed by the desire to reach new customers (19%) and to extend the offer of products and services (19%).
The most attractive sectors for acquisitions are those of consumer products and retail, in which 71% of companies plan deals, followed by industrial products (60%), life sciences (56%), technology (54%), automotive (54 %) and oil and gas (52%).
ITALIAN MANAGERS CONFIRM THEIR INTEREST IN M&A
For Italian managers, the main risks that can impact both the company's ordinary activities and M&A strategies are the same as those faced by executives on a global level, namely market volatility and geopolitical variables. 56% of respondents from our country expect acquisitions or merger plans in the next 12 months, in line with global expectations (57%).
The prospects for the M&A market are considered in line with the previous 6 months, both in terms of the number of acquisition opportunities (69% of the interviewees) and in terms of the probability of closing (78% of the same sample).
Even Italian managers highlight possible M&As in sectors that do not coincide with the core business, following product/service innovation strategies, the search for new customers, geographical areas and technology. M&A in core businesses are instead generally driven by the search for new technology (for 44% of respondents) and talent (for 28% of respondents). The vast majority of respondents (about 90%) expect a stable M&A pipeline in the next 6/12 months.
GEOPOLITICAL ISSUES AND NATIONALISM COMPLICATE INVESTMENT
According to the survey, the various variables of the geopolitical and macroeconomic landscape - from currency fluctuations to decreased trade flows - are increasingly worrying executives. This leads them to plan new deals, in search of a rapid growth path in a context of low expected growth rates for GDP. These challenges also add complexity to international business and for the first time in the Barometer's seven years the UK is no longer in the top 5 investment destinations for global executives due to the complexity of cross-border business.
The domestic M&A market in China will be substantial in 2017, with cross border investments of $160 billion to date. China will also continue to be among the largest outbound buyers having already made investments in more than 50 countries in 2016. The United States, China, Germany, Canada and France are the top 5 destinations for doing business.
M&A IMPROVING IN 2017
Despite economic and geopolitical uncertainty, M&A intent (57%) remains well above the Barometer's long-term average (42%).
