This strong appetite for deals perseveres against a backdrop of geopolitical or emerging policy concerns, which are seen as the greatest risk to economic growth for 69% of businesses. Yet according to the Global Capital Confidence Barometer, the disruptive impact of technology on potential deal outcomes and business models remains at the forefront of the minds of the majority of executives.
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16th Global Capital Confidence Barometer
1. Can complex geopolitical
uncertainty and record
M&A coexist?
Despite policy uncertainties, companies
are giving the greenlight to deals in the
search for growth.
Global Capital Confidence Barometer
April 2017 | 16th edition | ey.com/ccb
2. Dealmaking continues at pace with
fundamentals driving activity
At a time of rapid disruption,
political change and policy
uncertainty…
… companies are proactively
managing their portfolios and
protecting their core business…
… but a resurgence of economic
confidence and positive
corporate indicators…
… also finds executives primed for
record dealmaking as they search
for above-trend growth.
Participant
profile
► Respondent community
includes more than 2,300 senior
executives surveyed in March
and April 2017
► Companies from 43 countries
► Respondents from 14 industries
► 1,168 CEO, CFO and other
C-level executives
ey.com/ccb
3. Global key findings
Top 10 actions that help define success in
today’s deal economy
ey.com/ccb
Learn to
live with
uncertainty
1 Follow the
customer
6
Constraints
are the ones
you create
2 Disregard
boundaries
7
Reimagine the
parameters of
your business
3 Walk through
walls
8
Play on your
terms4 Measure what
matters most
9
Your pipeline
is your lifeline5 Do integration
back to front
Geopolitical and policy uncertainty is a
feature of a globalized economy, but
technology-enabled disruption poses a
challenge to many business models.
M&A can offer a fast track to the
innovation needed to maintain pace with
the warp-speed customer-centric change
reshaping today’s business landscape.
New products and services are being
created at a pace not seen before —
being bold could be key to success as
today’s deals will likely be tomorrow’s
game changers.
Cross-border deals are a necessity —
successful companies will find ways to
navigate challenges such as rising
nationalism.
Do what you do best — adapt your
operating model to succeed in tomorrow’s
market.
The traditional walls that once defined
sector territories have dissolved —
executives need to seize opportunities
amid shifting industry models.
Be in total control of your own destiny
— rigorous and regular portfolio
reviews will enable you to be
strategically nimble and opportunistic.
Past performance is not necessarily an
indicator of future success — new ways
of focusing and filtering data can provide
insights into future customer trends.
Competition for quality assets is high,
and ensuring you are assessing a
number of M&A options is critical to
create multiple opportunities in such
a fast-moving market.
Always consider your overarching
strategy during integration, and enhance
potential value by targeting both top-line
customer experience and bottom-line
cost efficiencies.
10
4. Global key findings
M&A outlook
Dealmaking is set for a strong 2017. Concerns about an overheated market are countered by growing
deal discipline.
expect to actively
pursue acquisitions in
the next 12 months.
56%
ey.com/ccb
90% 64%
expect their pipeline to
increase or remain stable
in the next 12 months.
look at cross-border
deals to secure market
access and grow their
customer base.
5. Global key findings
Macroeconomic environment
Confidence high as executives anticipate the global economy improving and corporate earnings on an
upward track.
see the global economy
improving.
64%
ey.com/ccb
97% 69%
expect corporate earnings
to either improve or
remain stable.
cite a broad range of
geopolitical or emerging
policy concerns as
greatest risks to growth.
A resurgence of
economic confidence
is fueling growth
plans…
… and greater stability
in capital markets is
expected to foster
investment…
… while rapid
disruption, political
change and policy
uncertainty remain.
6. Global key findings
Growth and portfolio strategy
As technology disrupts business models and customer behaviors, businesses are more regularly
reassessing and reinventing their portfolios.
have increased the
frequency of their
portfolio review
process.
73%
ey.com/ccb
49% 50%
plan to outsource routine
operations or back-office
functions in the next 12
months.
cite digital innovation, the
search for growth and
sector convergence as
most prominent topics on
their boardroom agenda.
Emerging pressures
help to reinvigorate
portfolio review
processes…
… and outsourcing
backroom functions will
help focus on core
operations…
… as companies look
to counter disruption
and accelerate growth.
7. Global key findings
North America the focus of cross-border deals
Companies are looking across a broad range of geographies for deals to secure market access and grow
their customer base, with a pivot toward developed markets.
ey.com/ccb
North
America
Latin
America
Western
Europe
Eastern
Europe
Africa
and Middle
East
Asia-
Pacific
Outside domestic market
Immediate region
Domestic market (home country)
Primary preferred destination
outside their own region
Respondents were polled on their top five
investment destinations; this chart reflects
the top preference for each region.
8. Global key findings
Top 5 investment destinations
Companies are looking across a broad range of geographies for deals to secure market access and grow
their customer base, with a pivot toward developed markets.
ey.com/ccb
United States
1 2 3
4 5
China United Kingdom
Germany Canada
The United States retains its
position as the center of global
M&A. Conditions are set for
another strong year in US
dealmaking, with growth
acceleration anticipated,
executives and consumers
expressing confidence, and
supportive capital markets.
China is now well established as
the second most important market
of global M&A. While the focus of
China-involved dealmaking in
2016 was outbound acquisitions,
2017 will be firmly centered on
domestic combinations and
inward investments.
While the United Kingdom briefly
fell out of the top 10 destinations
for investment in the survey
following the referendum on
membership of the European
Union, it has quickly rebounded
as an investment destination in
this Barometer.
9. Global key findings
Top sectors and key M&A drivers
ey.com/ccb
Automotive and
transportation
Consumer products
and retail
Mining and
metals
Oil and gas Power and
utilities
Telecommunications
► Collaborative product development,
supply chain and production, based
on predictive analytics, robotics
and Internet of Things (IoT)
technology, are driving innovation
across the automotive value chain.
► Companies’ M&A strategies
revolve around acquiring innovative
capabilities offered by start-ups.
► Cross-border transactions are expected
to increase as large regional companies
look to move from being strong regional
leaders to global competitors.
► Portfolio optimization will also be a major
theme, with large European and North
American conglomerates refining their
portfolios to focus on core assets and
category expansion.
► During the price downturn, the
mining industry was selling non-
core assets to reduce debt and
optimize balance sheets.
► The recovery of commodity prices
has released the immediate
pressure on companies to sell, and
some have postponed divestments.
► Portfolio optimization is expected to
be at the forefront across the oil
and gas value chain. Companies
are making concerted efforts to
improve their portfolios and move
toward low-cost, high-productivity
regions.
► This will drive deal activity,
especially for the upstream
operators. Companies will want to
dispose of non-core assets and
acquire acreage in core areas.
► Expansion in distributed generation,
such as solar photovoltaic and battery
storage, and new energy technologies,
such as microgrids, and virtual power
plants is disrupting traditional utility
business models.
► Smart technology, telecommunications
and analytics are being used to optimize
energy delivery and enhance customer
experiences. Utilities are acquiring new
capability through acquisitions or
partnering with telecommunications and
technology providers.
► Increasing convergence and
competition with technology and
media companies, combined with
advances in technology and
digitalization, are disrupting business
models across the telecom landscape,
leading to increasing combinations.
► Telcos will grow their revenues in the
digital landscape by capturing
adjacent business options, including
over-the-top, Internet of Things and
machine-to-machine information.
10. Global key findings
Disruption drives the next wave of dealmaking
ey.com/ccb
Can heightened geopolitical uncertainties and buoyant
M&A coexist?
Yes.
Why? Because geopolitical concerns, though a mainstay feature of the boardroom,
are overshadowed by more immediate and pressing risks and opportunities.
Geopolitical issues may dominate the headlines, but boards are laser-focused on
countermeasures against technological disruption and seizing new routes to growth.
Those countermeasures will often involve M&A.
But, while technology and digital disruption are major drivers of the current market,
other considerations are also spurring deal activity. Geographical expansion to secure
supply chains and increase customer reach will accelerate cross-border M&A. Private
equity is returning to replenishing mode. Lastly, corporates are increasingly
reassessing and reshaping their portfolios, creating a natural pipeline of deal
opportunities.
Consequently, the M&A market is healthy. And we can expect further deal activity. As
our front cover indicates, the search for growth is a green light for dealmakers.
Skeptics may maintain that heightened levels of deal activity lead to too many bad
deals being pursued. However, this is not the case in today’s M&A market.
Companies are using advanced analytics, combined with data-driven diligence and
integration, to target the right deals and integrate them in the right way.
The result: A strong outlook for dealmaking prevails.
Steve Krouskos
EY Global Vice Chair,
Transaction Advisory
Services
Follow Steve on:
Twitter and Linkedin
11. Contacts ey.com/ccb
Global
Steve Krouskos
EY Global Vice Chair,
Transaction Advisory Services
EY Global Limited
steve.krouskos@uk.ey.com
+44 20 7980 0346
Follow on:
Twitter | Linkedin
Julie Hood
EY Deputy Global Vice Chair,
Transaction Advisory Services
EY Global Limited
julie.hood@uk.ey.com
+44 20 7980 0327
Follow on:
Twitter | Linkedin
Barry Perkins
EY Global Lead Analyst,
Transaction Advisory Services
EY Global Services
bperkins@uk.ey.com
+44 20 7951 4528
For a conversation about your capital strategy, please contact us.
Americas
William Casey
EY Americas Leader,
Transaction Advisory Services
william.casey@ey.com
+1 212 773 0058
Asia-Pacific
Harsha Basnayake
EY Asia-Pacific Leader,
Transaction Advisory Services
harsha.basnayake@sg.ey.com
+65 6309 6741
Europe, Middle East, India
and Africa (EMEIA)
Andrea Guerzoni
EY EMEIA Leader,
Transaction Advisory Services
andrea.guerzoni@it.ey.com
+39 028 066 93707
Japan
Vince Smith
EY Japan Leader
Transaction Advisory Services
vince.smith@jp.ey.com
+81 3 4582 6523