Executives optimistic about global economy

Wednesday, 13 November 2013 00:00 - - {{hitsCtrl.values.hits}}

By Shabiya Ali Ahlam The latest Capital Confidence Barometer of Ernst & Young suggests a return of deal activity after a five-year period of falling Mergers and Acquisitions (M&S) globally. While the fundamentals are in place to foster M&A, confidence in the global economy is at its highest for two years with cash being in abundance and credit readily available.

Inorganic growth options During a lunch session hosted by Ernst & Young for the Commonwealth Business Forum delegates, Partner of Ernst & Young, Singapore Lynn Tho said that this does not mean the world economy will see a bottom time deal making since strategies to improve operational efficiencies have been largely implemented. However, she noted that organic measure alone may no longer meet the growth mandates. “Many may now consider the inorganic growth options in order to grow,” she said. Tho noted that confidence in closing deals has significantly increased, as the number and quality of M&A opportunities has strengthened the buying intentions. The survey being conducted among executives of the middle management level and above, across diverse sectors around the world showed that 69% of the respondents expect an increase in deal activity in the market. M&A a preferred route The culture of the M&A caution has been understandable given the unprecedented economic turmoil the world has experienced. “This market is also sensitive to geopolitical issues and continued volatility could subdue deal flow,” she said. However, with organic growth measures providing finite returns, M&A should once again be a preferred route for meaningful growth. Therefore, barring the major shocks, M&A and investing will return to prominence on the capital agenda. And with companies observed to be allocating more acquisition capital to developed markets such as the UK, US, Japan, Germany, and China, Tho stated that these economies are expected to lead the return of M&A. Simultaneously, companies will continue to pursue emerging markets such as India, Brazil, and other frontier markets such as Vietnam and Indonesia as growth mandates take hold. Rising confidence level In terms of economic confidence, she said the confidence level has risen dramatically over the last 12 months, which is a clear indication, according to Tho that the economy is improving at an increasing rate. “This confidence resonates form stable economic fundamentals, which are growing GDP, credit availability, and increased job creation, particularly in mature markets.” Contd. on page 11 Executives... Furthermore, the survey also indicated that that growth expectation continue to rise around the world as substantially, all respondents anticipate economic growth, and those expecting growth in the 3-5% range increased significantly. “This correlates with companies’ increasing ability to invest and stakeholder demand for meaningful growth,” highlighted Tho. Global deal making She added that developed economies will prompt global deal making as some of the world’s most mature and influential markets are increasingly confident in the strengths of the global economy. “They believe the economic fundamentals are sound, and the recurring debts and flows have largely been eliminated,” Tho pointed out that it is the Chinese respondents who are the most confident, but mature markets such as UK, US, Germany, and Japan also share the same sentiments.