Ernst & Young Capital Confidence Barometer points to recovery
Ernst & Young’s fourth Capital Confidence Barometer has found that while nearly a third of Australasian businesses are considering opportunities for mergers and acquisitions, they are less likely now to acquire than in the previous year.
This result is perhaps due to the lack of perceived quality deals in the market with 60% of respondents saying the gap between buyer/seller price expectations has increased in the current environment.
The report concluded, however, that the trend was likely to be temporary, as most respondents stated that credit conditions had improved over the past six months, and 40% said that access to finance was not an issue.
Many medium caps and smaller businesses were still facing the need to refinance, pay down debt or fund organic growth. The biggest refinancing issue was the lack of available debt (32%) and lack of viable alternatives to debt (27%).
Ernst & Young predicts that M&A activity will pick up throughout 2011, largely through script based mergers with peers. They also foresee M&A activity increasing as a result of demergers (with 20% of respondents saying that divestments were likely in the next six months), continued inbound investment especially from China and India and with larger corporates honing in on emerging markets.
Overall, the Ernst & Young survey found an optimistic outlook - despite the negative impacts of the high dollar, natural disasters, the Middle East situation and European debt concerns - with 29% of Australasian respondents saying the financial crisis is over in their industry and 56% expecting the downturn to end in the next 12 months.
Globally, the technology and oil and gas sectors fared the best with almost half the respondents in those sectors (48% and 45% respectively) saying that they had come through the other end, and the GFC was behind us.
The Enrst & Young Capital Confidence Barometer is based on a survey of 1,000 executives conducted in February and March 2011. 97 of the respondents were from Australasia.
The report can be accessed at http://www.ey.com/AU/en/home