Survey Finds Execs Bullish About Dealmaking

Ernst & Young says a record 75% of U.S. firms are planning to pursue deals in the next year but executives are proceeding judiciously.
Matthew HellerOctober 27, 2015
Survey Finds Execs Bullish About Dealmaking

A record number of U.S. executives plan to actively pursue acquisitions in the next year, with the pursuit of long-term growth outweighing short-term concerns about financial market volatility, according to an Ernst & Young survey.

The accounting firm said in its latest semiannual Global Capital Confidence Barometer that the M&A market is moving deeper into a sustained upturn after a prolonged phase of industry-changing megadeals.

“We see strong evidence of companies planning to pursue more transactions in the next 12 months than they completed in the prior year,” EY said.

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Three-quarters of survey respondents indicated their company would actively pursue deals, the highest number in the six-year history of the barometer. Eighty percent of companies have either two or three deals in the pipeline and upper-market deals (between $250 million and $1 billion) are expected to increase.

Companies in diversified industrial products; consumer products and retail; automotive and transportation; real estate; and life sciences are expected to be the most acquisitive over the next 12 months. “A desire to establish inorganic growth to buffer against any potential economic downturn is a main driver of deal activity,” EY said.

Some analysts have suggested the M&A market is overheating, but EY found that executives are proceeding judiciously as they look for growth.

“They are conducting more thorough due diligence, including new levels of cyber risk scrutiny,” Pip McCrostie, EY’s global vice chair of transaction advisory services, said. “And they are prepared to walk away from transactions that do no t meet their strategic goals.”

Eighty-six percent of respondents said cyber-attacks as a high level threat to the dealmaking process and 96% have canceled deals they felt were no longer in their best interest.

“As executives balance exuberance and prudence, this period of cautious M&A could lead to a sustained deal boom that will benefit a multitude of companies’ growth goals,” Rich Jeanneret, EY Americas vice chair of transaction advisory services, said in a news release.

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