Despite market volatility, executives across the globe still have appetites for corporate takeovers, says a new EY study.
That’s what has been diving the recent wave of mergers and acquisitions, and we’ll see more over the coming year, adds EY, which finds 59% of global companies are planning to secure at least one deal over the next 12 months. This will help cushion waning global growth as China’s economy slows, for instance.
The figure for October is up from 56% in April and 40% at the same time last year, and it represents the highest interest in acquisitions that EY’s survey of corporate deal making has found in its six-year history. The low point was at the start, when only 24% of companies signaled the intention to make a takeover.
“With modest increases in global GDP, organic growth alone is not enough for companies to expand and reshape at the pace they need,” says Pip McCrostie, EY’s global head of transactions.
“The search for growth is lifting deal making to record highs, and executives are focusing on M&A to secure innovation, competitive advantage and market share for the foreseeable future,” she adds.
M&A activity has really gathered pace this year with deal values, according to EY. It’s already up 35% over 2014 and there have been more megadeals in 2015 than in previous years—these deals are valued above $10 billion.
Earlier this month, the world’s top two beer makers agreed to join forces to create a company that would control nearly a third of the global market. Much of the logic behind the 69 billion-pound ($106 billion) takeover of British-based SAB Miller by Anheuser Busch InBev is to cope with faltering beer consumption in many parts of the world.
Other big deals this year include: Royal Dutch Shell’s 47 billion-pound ($71 billion) yet-to-be-completed acquisition of BG Group; and the $62.6-billion merger between Heinz and Kraft Foods, which is now called Kraft Heinz.
EY says the boundaries between industries will blur, with 48% of executives planning acquisitions in a different sector due to new technology impacting almost everything along the business chain. The manufacturing and retail sectors are set for the most such activity.
Further, companies are increasingly ready to make deals outside their home country. EY says 70% of respondents are looking to do so, with the 19-country Eurozone set to see a rise in deals amid hopes that the debt crisis that has gripped the region has abated following the latest bailout of Greece.
“This is down to increased confidence in the stability of the region,” says McCrostie.
Though deal-making has been on the rise over the past few years, EY says it could have been even higher. It noted that 73% of executives have walked away from deals over the past 12 months.
“Executives are taking a long-term view and evaluating deals more carefully than ever before,” says McCrostie. And, “they are stepping back when necessary.”
EY’s survey was based on surveys of more than 1,600 executives in 53 countries.