Despite recent snags in large deals and the rude greeting some unsolicited bidders are receiving from takeover targets, global executives are very confident in the conditions for dealmaking, and their appetite for acquisitions remains strong. The question is, will it last?

EY’s Global Capital Confidence Barometer for April, which surveyed 2,500 executives in 43 countries, found that about half of them said they intend to pursue acquisitions in 2018, and 61% said they plan to increase their M&A pipelines in the next 12 months.

However, the M&A market is not expected to see “a frenzy of buying at inflated multiples or buyers over-leveraging to finance deals,” EY said in its survey report.

Instead, executives appear to taking a more disciplined approach to dealmaking. Nearly three-quarters of the survey respondents indicated they had either failed to complete or canceled an acquisition in the last 12 months. Most frequently it was due to competition from other buyers, disagreement on price, or valuation concerns.

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Contributing to the frequent deal failure is heightened government intervention, which 37% of survey respondents said was one of the biggest potential risks to takeover transactions this year.

“A number of countries are looking to bolster their ability to block takeovers, primarily from abroad, using national security or national interest provisions,” according to EY’s report.

“The manner in which regulators assess deals is also evolving. Previously, it was simply a matter of market share. Now competition authorities are examining other factors, such as combined research and development strengths or access to and control of data.”

At the same time that is occurring, inflation is rearing its ugly head, also threatening to disrupt transaction volumes. Executives cited it as the biggest risk to their overall investment plans for 2018.

Inflation can not only trigger higher materials costs and wages, but rising inflation (in concert with market volatility, currency shifts, and interest-rate hikes) could “place an immediate strain on the availability of cash to reinvest and recycle into growth opportunities,” pointed out EY.

Meanwhile, C-suite executives (which made up 64% of respondents) remain bullish. They are being motivated by robust economic conditions, but they are also being pushed by the demands of boards of directors and activist shareholders.

“Portfolio transformation” and identifying strategic gaps in portfolios is the main priority for boards in the next 12 months, said 70% of the survey’s respondents.

“Unless these gaps are filled, many companies may find themselves at a competitive disadvantage,” said EY in its report on the survey.

Nearly a third of the executives said they have increased the frequency of portfolio reviews in the past three years. The most popular reason for doing so? The threat to businesses from “digitally enabled competitors and startups,” according to EY.

“Boardrooms are also looking at the increased competition driven by sector convergence and technology enabled changes to established business models,” the report said.

Besides the influence from boards, executives are dealing with the heat applied by activist shareholders. “Divesting and disposal of assets” is what activists will be most focused on in the next 12 months, according to 43% of respondents.

In conducting their most recent portfolio reviews, in fact, 39% of executives indicated to EY that they “identified an asset at risk of disruption to divest” and 32% said they identified an underperforming asset to divest.

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