Improved confidence means companies are planning on pursuing more M&A activity in the next 12 months, survey suggests.
TORONTO — Despite growing confidence among Canadian executives that the global economy is improving, companies are still focusing on controlling costs to optimize capital, according to Ernst & Young’s (EY) latest Capital Confidence Barometer survey.
According to the survey, 79% of Canadian executives believe the global economy is improving – up 24% from October 2013.
“Canadian executives are much more confident in both the global and Canadian economies than they were just six months ago,” says Tony Ianni, Transaction Advisory Services Partner at EY. “They show some of the most confidence in the global economy of all the countries we surveyed.”
Ianni says that confidence means companies are planning on pursuing more M&A activity in the next 12 months.
“Forty-one percent of Canadian executives expect to pursue an acquisition in the next year, up from 33% in October,” he says. “There’s also more confidence that the valuation gap between buyers and sellers will contract, which means there’s a healthy pipeline of transaction opportunities.”
According to the survey, 66% of Canadian companies have up to three deals in their pipeline, and 34% are looking at four or more deals.
In addition to an increased interest in deals, the survey found Canadian companies are particularly optimistic about corporate earnings, credit availability and short-term market stability.
“Companies have been – and continue to be – focused internally on optimizing their businesses,” explains Ianni. “With stronger balance sheets, they’re also now more willing to use debt to finance transactions. That will hopefully help us return to a more traditional level of acquisition interest.”
Other key findings include:
“Economic confidence at home and abroad is high, and other fundamentals remain sound,” says Ianni. “We’ve been cautiously awaiting a rebalancing of the capital agenda within the boardroom, and these indicators signal that wait may be over.”
EY’s Capital Confidence Barometer is a survey of more than 1,600 senior executives from large companies around the world and across industry sectors to gauge corporate confidence in the economic outlook and identify the emerging capital practices