Global executives are still wary of under taking any merger and acquisition (M&A) activities, as per the survey by Ernst and Young (E&Y). Even though the global environment is improving with better access to credit and cash, caution rather than confidence is driving global M&A sentiment.
According to E&Y's Capital Confidence Barometer, which covered over 1,500 senior executives in 50 countries, a more favorable deal making environment is not yet convincing large corporates to engage in M&As. A change, if at all is expected only when there comes a point when shareholders exert pressure or governments incentivise companies to do something with excess cash. Until then the business sentiment is expected to be cautious.
Mirroring the findings of survey, the first quarter of this calendar year, M&A volumes globally were down 22% compared to the same period last year. The survey further noted that companies headquartered in India, UK, US and Germany were among the most bullish, while their counterparts in Japan and Russia are less so. In fact China, India, US, Brazil and Indonesia are the top five target markets.
Corporates are now more focused on creating value by organic growth, portfolio optimisation and divestment. The proportion of companies planning to sell assets over the next 12 months has risen from 26% in October 2011 to 31% till date. Divestment is especially pronounced in North America; and is likely to grow across Europe and Japan in the coming months as companies look to re-position themselves as a result of Euro-zone crisis, the survey added.
In terms of global economic situation, 52% of respondents thought that it is improving as against 26% in October 2011, while only 20% remain pessimistic about the economy compared with 37% six months ago.
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