Executives still hungry for deals after 2015’s record, EY says

bloomberg

Believe it or not, companies still want to make deals.
Half of executives expect to pursue acquisitions in the next 12 months and 40 percent aim to boost sales through partnerships, according to EY’s Global Capital Conference Barometer, a survey of more than 1,700 executives in 45 countries.
While that’s down from the 59 percent of participants who were anticipating M&A in the October report — when dealmaking was on its way toward hitting a peak that would ultimately rake in $3.6 trillion of acquisitions — low growth and volatile markets have companies looking for ways to boost earnings and diversify.
“Prolonged economic challenges are driving investment decisions, leading companies to ally and cooperate to generate growth,” Pip McCrostie, EY’s global vice chair of transaction advisory services, said in the report. “M&A remains a strong option to accelerate strategic plans and offer the prospect of game-changing competitive advantage.”

Assets on Sale
To be sure, the numbers so far are pointing to a slower year for deals. Global M&A activity in the first quarter dropped about 10 percent from a year earlier to $627.8 billion. The U.K.’s threat to leave the EU has damped deals there. More difficult financing markets and geopolitical risks could also be making would-be buyers cautious. Still, uncertainties in the market may ultimately work in acquirers’ favor when it comes to the price for assets, EY said. Most executives said the gap between buyers’ and sellers’ valuations are down to less than 10%, an improvement from six months ago.

International Buyers
Almost three quarters of participants said they’re weighing cross-border investments. Buyers in China, which is looking for intellectual property as well as consumer and services businesses to rebalance its decelerating economy, are driving much of that.