US most attractive M&A target country, finds annual EY report

21 October 2019 Consulting.us

Despite geopolitical and economic headwinds, global executives are bullish on mergers and acquisitions activity, according to EY’s 21st Global Capital Confidence Barometer. A majority of global firms (52%) plan to acquire in the next 12 months, with the US sitting as the most attractive location for M&A investment.

Overall, global executives are not perturbed by the likelihood of recession, with 54% not expecting an economic downturn in the near- to mid-term. US executives are the most bullish, with 78% not expecting a downturn. Opinions are less rosy in Europe, however, with 80% of German executives expecting a downturn, and 62% of UK executives.

The EY survey found that companies are managing tariff and trade issues, with 64% actively planning to mitigate impacts through reconfigured supply chains and relocated production.

Perhaps due to their optimistic economic outlook – as well as a continuing desire for technology and talent – the surveyed executives forecast buoyant M&A activity over the next year. Fifty-five percent expect an increase in megadeals topping $10 billion, 72% do not expect a slowdown in overall M&A activity, and 71% expect an increase in cross-border dealmaking.

US most attractive M&A target country, find annual EY report

Respondents tagged the US as the preferred destination for M&A investment, while the UK ranked second despite Brexit uncertainties. Germany, China, and Canada rounded out the top five.

"The ongoing trade issues in a number of the major economies have not caused dealmakers to shelve plans,” Steve Krouskos, EY Global vice chair of transaction advisory services, said. “The imperative to transform outweighs the risk of uncertainty. As long as this continues, the drumbeat for M&A will go on. Deals continue to be powerful means to reshape portfolios and accelerate the transformation imperative facing CEOs.”

Sixty-three percent of global execs said they plan to allocate more than 25% of investment capital to technology, focusing mostly on solutions that drive top-line growth. A majority (56%) noted they would invest in tech through acquisition, joint ventures, or external venture funds.

Nearly two-thirds (61%) said they were having difficulty sourcing the right skills and talent, with German (72%) and UK (66%) respondents struggling more than the global average.

"In terms of investing in technology, the answer to the buy-versus-build question for most companies is tilting toward buy," Krouskos added. “At the same time, the shortage of talent is a constraint on growth and acquiring the skills needed to underpin future growth is increasingly part of the current M&A story."


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