M&A prospects being driven by fastest-growing businesses
New research from the Grant Thornton International Business Report (IBR) reveals that global M&A activity has risen from this time last year, with dynamic businesses – the fastest growing, most agile companies in the survey – leading the way. The results confirm that leaders of the world's most progressive businesses view acquisitions as an important means to supplement and boost their existing operations.
The IBR data shows that 31% of businesses globally expect to grow through M&A over the next three years, up from 28% in 2012. However, this rises to 55% of dynamic businesses and is a pattern repeated across all regions. For example, 47% of all businesses in North America plan to grow through M&A, a ten percentage point rise from this time last year; but this rises to 71% for dynamic businesses. And across the G7, dynamic businesses (64%) are almost twice as likely to be looking at M&A as the all business average (36%).
In addition, the last year has shown businesses putting these plans into action with 39% confirming that they have seriously considered at least one acquisition over the past 12 months.
Mike Hughes, global leader for M&A at Grant Thornton, said: "The results are important on three levels. Firstly, the global increase in forecast M&A activity is another sign that the recovery is on a firmer footing and that the focus of businesses is moving away from simply staying afloat towards a growth agenda.
"The second is how important M&A is to the fastest growing businesses in the world as they seek to access new markets and new pools of talent and technology to maintain their competitiveness.
"Finally, the evidence that these businesses are actually investing time and funding into investigating acquisitions now, rather than just stating an aspiration to acquire in the future, is a great indicator of a robust market."
In another sign of how the global economy is changing as the developed world slowly recovers from the financial crisis, forecast M&A activity in emerging economies has dipped according to the IBR. Just 19% of businesses in the BRIC economies expect to grow through M&A over the next three years, down from 27% this time last year. By contrast the G7 M&A prospects have risen from 29% to 36% over the same period.
Mike Hughes added: "Businesses in many developed economies have been operating in something of a holding pattern, waiting for signs that the recovery was sustainable and valuations realistic before making an acquisition. The upshot is that corporates are sitting on record high levels of cash which they need either to return to shareholders, invest in their existing operations or use to acquire new businesses. More fluidity in the debt and equity markets is also helping to drive M&A activity in these markets.
"By contrast, emerging economies were barely affected by the financial crisis but more recently their growth, whilst still impressive, has slowed markedly. This, coupled with the prospect of certain political or structural changes, for example in SOE reform in China, suggests to us that many businesses in the emerging economies are taking a pause in prioritising M&A activity. We fully expect the interest in M&A to return strongly in these economies in the next few years."
The Grant Thornton International Business Report (IBR) provides insight into the views and expectations of more than 12,500 businesses per year across 45 economies. This unique survey draws upon 22 years of trend data for most European participants and 11 years for many non-European economies.
Data collection is managed by Grant Thornton’s core research partner, Experian. Questionnaires are translated into local languages with each participating country having the option to ask a small number of country specific questions in addition to the core questionnaire. Fieldwork is undertaken on a quarterly basis. The research is carried out primarily by telephone.
IBR is a survey of both listed and privately held businesses. The data for this release are drawn from interviews with more than 12,500 chief executive officers, managing directors, chairmen or other senior executives from all industry sectors conducted between January and December 2013.