Fewer corporate execs expect to pursue acquisitions: survey

NEW YORK Sun Oct 7, 2012 7:04pm EDT

NEW YORK (Reuters) - Executives are more downbeat than they have been in years about the prospects for corporate dealmaking, citing worries about the euro zone and softening in emerging markets, according to an Ernst & Young survey released on Sunday.

Just 25 percent of the executives polled for Ernst & Young's seventh Global Confidence Barometer said they expect to pursue an acquisition over the next six months, in the most pessimistic outlook since the firm started the survey in 2009.

"We are looking at low or stagnant growth for quite a number of years to come," Pip McCrostie, global vice chair of transaction advisory services at Ernst & Young, said in an interview. "People are thinking, 'I want to be much more conservative, much more risk averse.' That leads to a drop in the M&A appetite and a drop in the desire to sell."

Ernst & Young polled more than 1,500 executives for the survey, more than half of whom were chief executives, chief financial officers or other high level executives. Those surveyed were from 41 countries and spanned 24 different sectors.

The survey mirrors the decline in dealmaking seen this year. There have been roughly $1.7 trillion in deals announced so far this year, down 14 percent from last year, according to Thomson Reuters data.

The decline in deals has come even though the tools to drive activity higher have been in place for some time. Record cash on corporate balance sheets and cheap financing for borrowers should make M&A a highly attractive tool for growth.

Executives, however, are still pessimistic about the global economy. Only 22 percent of respondents believe the economy is improving, down from 52 percent in April. Around two thirds of the executives surveyed believe the current global economic downturn will last more than a year, including 15 percent who believe it will extend more than two years.

"There is a much greater understanding about the scale, severity and impact of the euro zone," McCrostie said. "People have realized it's not just regional, it's not counterparty risk, it's a global issue."

Growth has become less of a priority for the executives, according to the survey. Only 41 percent said growth would be their top priority, with 31 percent saying they would look to cut costs and become more efficient, and 25 percent looking to just maintain stability.

Still, companies are not looking to sell off non-core assets. About 19 percent of the executives said they were looking to make divestments in the next year, down from 31 percent in April.

The sectors in which executives said they were most likely to pursue deals included industrial products, financial services and oil and gas. Respondents from the automotive and technology industry were least likely to say they would pursue deals soon. (Editing by Leslie Adler)

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