Increase in M&A activity

Data from the first EY 2022 CEO Outlook Survey has recorded the opinions of over 2,000 CEOs the world over and has found that mergers and acquisitions (M&A) activity has accelerated this year. Since 2020, M&A has increased by a third, generating a whopping £3.6 trillion of revenue.

Nearly two-thirds of the CEOs surveyed expect their companies to pursue acquisitions in the next 12 months, this figure increasing from 48% at the beginning of last year. Furthermore, more than half of respondents said that they will prioritise investment in existing businesses, and digital transformation and sustainability. As well as this, 79% of those surveyed have adjusted, or are making plans to adjust, their supply chain in order to reduce costs in the event of future disruption.

Risks to future investments

The CEOs who responded indicated that they have concerns for their future investment plans due to multiple external factors. For instance, the respondents identified rising input prices and trade tensions, the impact of climate change, increasing competition from challengers and the impact of Covid as the biggest threats to the future growth of their business. 37% of those surveyed indicated that Covid had a negative effect and caused disruption to their companies, at least in the short term.

However, despite these fears, the CEOs surveyed seem keen to push full steam ahead with their planned deals. Prioritising those that will improve operational capabilities, as well as their environmental, social and governance (ESG) positioning and sustainability promises. ESG has become considerably more important for dealmakers, with an overwhelming 99% of responding CEOs claiming that they incorporate these issues into their buying strategies.

However, unfortunately, 65% of respondents admit that they have experienced pushback from investors and shareholders regarding their sustainability transition strategy. Furthermore, almost a quarter confirmed that their investors are not showing support for long-term investment plans and are still fixated on quarterly earnings.

2022 perspective for M&A

In terms of acquisitions, the US, UK, China, India, and Germany are the preferred locations for the CEOs who are looking to secure one this year.

Technology, health care and advanced manufacturing are the top three sectors that are likely to purchase assets.

Andrea Guerzoni, EY Global vice-chair (strategy and transactions) made the following comment on the study’s findings:

‘Deals will remain a key lever in CEOs’ investment toolkit. Coming off a record-breaking run for M&A, many CEOs will be focusing on integrating assets acquired over the past 12 months, but CEO acquisitive intentions should ensure continued deal activity at high levels in 2022.’

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