Finance executives worried, but looking for deals

NEW YORK (Reuters) - Financial executives are worried about their economies, but are looking for opportunities to buy companies on the cheap and grow their businesses through mergers and acquisitions, according to a global survey released on Tuesday.

When asked where they were willing to spend money in the next year, the 370 chief financial officers and other corporate finance executives polled by American Express Co and CFO Magazine's Research Services group, said they were most likely to choose mergers and acquisitions.

"I think companies are really seeing a great opportunity for M&A particularly when we're talking about smaller bolt-on acquisitions," said Celina Rogers, director of research at CFO Research Services.

Twenty-nine percent of those polled said their companies plan to allocate more cash to mergers and acquisitions over the next year. Deal-making topped executives plans to spend on capital improvements, strengthening their balance sheets, paying dividends or buying back stock.

"Valuations are starting to go down and that means it just makes more sense for corporations," Rogers said, adding that mergers have likely grown more attractive to corporations because private equity buyers, who rely on financing, have backed off.

Fifty-six percent of the executives polled said they more likely to invest to expand their market reach, with 32 percent saying they would spend on marketing, advertising and public relations.

Companies may also view deals as a low-risk growth strategy because the firms they are buying are already established, Rogers said.

But despite the urge to look for deals, the executives polled also said they had economic concerns.

Few of the executives felt their countries' economies would grow this year, and many indicated concerns about energy costs, consumer spending and the availability of credit, according to the survey

Executives from the United States were far more pessimistic than their peers in other regions with 57 percent of those polled predicting the U.S. economy would contract in the coming year.

The survey also showed companies were most concerned about how energy costs were eating away at their profits, with 42 percent of those polled citing energy costs as an urgent concern.

One executive interviewed in the survey, but not named, said his company had recently doubled the speed at which it sells through its inventory, but saw little improvement because the price of its raw materials doubled at the same time.

"While cost of capital and cost of credit is a concern, the rising cost of energy was the more salient concern," said Gunther Bright, senior vice president of the Global Client Group at American Express.

Just 26 percent of executives polled said the cost of capital was an urgent concern.

Bright said some companies may not be worried about their access to financing, because that tends to be more of a long-term issue and some of those polled said they had lined up financing for their companies before the credit crisis began last summer.

(Reporting by Emily Chasan; Editing by Tim Dobbyn)