Despite 2018 being on track to become a near-record year for the number of global mergers and acquisitions (M&A), intentions amongst UK companies to pursue deals in the next twelve months has hit a four year low, according to EY’s 19th Capital Confidence Barometer (CCB19), a biannual survey of more than 2,600 executives across 45 countries.
While UK respondents to EY’s survey remain confident in the economic outlook, this confidence looks less likely to translate into M&A activity in the next 12 months with 45% of executives saying they will actively pursue deals (down from 65% in July 2018). Despite the sharp drop, this figure brings the UK in line with global M&A expectations (46%).
At the same time, the UK has climbed to second place (from fifth) on the global M&A destination list. According to CCB19, US (1), Canada (3), Germany (4), and France (5) complete the list of top five investment destinations of choice amongst global executives.
Operating in an uncertain environment has led UK business to opt for safer routes to allocate their capital. EY CCB18 found that UK respondents are focusing most of their resources and attention on ‘investment in existing operations’ (30%) and ‘improving working capital management’ (29%) ahead of ‘acquisitions, JV’s and alliances’ (7%). Increasing regulatory intervention and protectionism (47%) are creating the strongest deal headwinds.
Steve Ivermee, EY’s Transaction Advisory Services Managing Partner, said: “Uncertainty is giving some executives pause for M&A thought and that will likely result in a fall from current deal highs in the next 12 months.
“UK companies may expect to be less active, but are maintaining their deal pipelines with an emphasis on operational fitness, as trade and regulatory headwinds grow. They haven’t significantly downgraded their expectations for deal markets, however, so it looks like they are temporarily holding a lower gear rather than actively retreating from transactions.”