M&A Appetite Drops to Lowest Point Since 2014

In the latest “EY CEO Outlook Pulse” research conducted by the consulting and auditing firm EY, interviewing 1200 global CEOs, M&A activities have dropped to the lowest level since 2014. Further, in this blog „AI“ buzzword will be put in the context of companies and their development.

EY published its latest „ EY CEO Outlook Pulse” October version. The main theme in the mentioned outlook is M&A, followed by the buzzword „AI“ that we can find anywhere currently. Below you can find how CEOs globally think of it and where they expect further M&A development.

Over two-thirds of CEOs see the need to quickly act on AI. However, a similar proportion of reported CEOs also see uncertainty in the implementation. Bottom line, 99% are planning to invest in AI. Executive directors plan to gain a strategic advantage over competitors through the use of artificial intelligence. Specifically, 70% of executive directors see the need for prompt action regarding generative artificial intelligence, while at the same time, 65% emphasize that the uncertainty associated with GenAI complicates swift action. However, two-thirds also believe that the increase in companies claiming expertise in artificial intelligence complicates decisions in identifying and implementing credible partner ecosystems and acquisition goals. The majority of respondents, 87%, have already completed or are in the process of hiring new talents with relevant skills in the field.

Further, M&A was in focus of the EY report. M&A activities have dropped to the lowest level since 2014, with only 35% of surveyed executive directors planning to carry out M&A activities in the upcoming year. EY notes that the inclination for M&A transactions is significantly higher in the American region, reaching 47%, while in the EMEA region, only 29% of CEOs opt for this type of decision. As stated, in the third quarter of 2023, a strong increase in M&A was observed in America, especially concerning local companies. The slowdown in such transactions in other regions can be attributed to current geopolitical and macroeconomic uncertainties, with key factors including conflicts in Ukraine and the Middle East, tensions between America and China, ongoing high inflation, and the rise in active interest rates. The research indicates that half of the surveyed directors still plan to expand their businesses in the Asia-Pacific region in areas not affected by war. Specifically, this policy applies to investments in China, Australia, India, Japan, and Singapore, which are among the most desirable markets.

Participants were asked how they expect their organization’s revenue growth and profitability will change in 2024 compared to 2023.

Source: EY CEO Outlook Pulse

Overall, in 2024, 66% of surveyed executive directors anticipate higher levels of growth, and 65% expect higher levels of profitability for their companies compared to 2023. This indicates that executives worldwide are ready for investments, despite a relatively unfavorable economic situation. Conversely, for those expecting lower levels of growth, more than two-thirds (68%) are also planning for lower levels of profitability. This will impact their ability to invest to reshape their business in the new cycle.

The outlook emphasized that even with these figures looking promising, they could be weighed down by global real GDP growth expectations. Currently, expectations stand 20% lower for 2024 than in 2019.

Actual and estimated global GDP growth data

Source: EY analysis of Oxford Economics data

Domagoj Grčević
Category : Blog

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