EY Report Talks Dealmaking in the Year Ahead

Geopolitical Tensions are Cutting into Dealmaking

The latest EY report from its Global Capital Confidence Barometer measures expectations for M&A activity for the year ahead and reveals interesting technology trends.

EY is a leader in assurance, tax, transaction, and advisory services. The company finds that business leaders have altered their portfolios due to a challenging geopolitical environment. However, the firm notes that 52% of global corporate leaders plan to pursue acquisitions in the next year.

Breaking Down the New EY Report

According to the EY report, the search for technology and talent is driving dealmaking. Roughly two-thirds of respondents plan to allocate more than 25% of their investment capital to technologies that can drive top-line growth. More than half of executives will invest in technology through acquisition, joint ventures or external venture funds. Almost two-thirds of respondents (61%) are experiencing difficulties securing the right skills and talent.

“In terms of investing in technology, the answer to the buy-versus-build question for most companies is tilting toward buy. At the same time, the shortage of talent is a constraint on growth and acquiring the skills needed to underpin future growth is increasingly part of the current M&A story,” said Steve Krouskos, EY Global Vice Chair, in the report.

He also noted that the trade debate between the United States and her partners has reduced M&A activity.

“The ongoing trade issues in a number of the major economies have not caused dealmakers to shelve plans,” he said. “The imperative to transform outweighs the risk of uncertainty. As long as this continues, the drumbeat for M&A will go on. Deals continue to be a powerful means to reshape portfolios and accelerate the transformation imperative facing CEOs.”

Finally, the survey revealed a gloomy economic outlook. At least 62% of respondents in the United Kingdom expect a downturn. And 80% of German corporations responding to the survey expect a recession.

The U.S. was the most upbeat with 78% of respondents not expecting an economic downturn.

[Related: Three Takeaways from the New KKR Consumer Report]

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November 20, 2019

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