The appetite for
M&A is declining for at least the next six months due to the uncertain global economic picture.

Our third Capital Confidence Barometer finds that while capital market conditions have improved since April, fewer businesses globally are considering mergers and acquisitions (M&A) in the next six months.

In April our second Barometer predicted the August surge in M&A activity in many markets — now we are seeing the appetite for M&A fall away, at least over the next six months.

In April, 38% were actively seeking M&A opportunities. That number has now dropped by a quarter even though boards are more able to respond quickly to acquisition opportunities, with only 16% restricted compared to 40% in our first study one year ago.

That is largely because growing optimism among executives about their own company and local economy prospects is dampened by increasing pessimism about the global economic landscape.

Austerity measures, increasing regulation and currency conflicts are just some of the issues undermining confidence in the global economy. The result is a greater focus on organic growth (75% now see this as a priority) through performance improvement and further cost efficiencies.

Management of capital in the current economy defines future success

Our unique global study around capital confidence continues to underline the critical fact that how organizations manage their capital today will define their competitive positions tomorrow.

How they raise, invest, optimize and preserve their capital is absolutely critical in these challenging times, and the Barometer gives us a clear indication of C-suite plans to achieve these strategic goals over the next 6 to 12 months.

The insights from these C-level respondents tell us that the global downturn is not easing, leading to increasing investor caution. We see a two-speed recovery, with more robust confidence in emerging markets contrasted with greater caution in many mature markets.

Our latest findings also show a growing gap
between the appetite to buy and the desire to sell

With fewer high-quality assets on the market we could see hostile approaches increase in the next six months.

• Capital market conditions are improving for M&A as favorable cash and credit positions relieve funding restrictions on deals.
• Nevertheless, the appetite for M&A is declining for at least the next six months due to the uncertain global economic picture. More companies are reluctant to acquire or divest due to increased taxes, austerity measures and regulatory changes — among other issues — which are undermining confidence in the global economy.
• We see evidence of “two-speed” recovery, with emerging markets ahead of developed counterparts and there remains a stronger appetite to acquire in high-growth markets.