Confidence in global mergers and acquisitions (M & A) is increasing, 58% of CEOs in the technology, media and entertainment and telecommunications (TMT) intends to realize such a transaction in the next year, compared with 42% six months ago, according to the EY Global Capital Confidence Barometer (BCC) report. Concerns about legislative turmoil and competition do not stop companies from capitalizing on the growth opportunities generated by such transactions.
73% of media and entertainment and telecommunications (TMT) executives are expecting an increase in the number of completed transactions, despite increased trade tensions around the world. This trend is based on strengthening confidence in economic conditions, with 94% of executives anticipating an improvement in the global economy, 87% of earnings, 87% of credit availability, and 76% of share value over the next three quarters.
Report data shows that all TMT executives plan significant technology investments this year.
For almost a quarter of the respondents (23%), the acquisition of technology, talent attraction, new production capacities, or innovative start-up companies represent the main motivations behind the acquisitions
Mergers and acquisitions, a new growth engine for technology companies
The report indicates an increase in appetite for transactions among technology companies, mainly due to the US Federal Reserve's decision not to raise interest rates in 2019.
61% of respondents in the technology sector intend to run a deal in the next 12 months, up from 40% in October 2018. Most respondents (92%) consider the technology sector's economy to have a general increase, compared with 51% of respondents six months ago. And 80% mention an improvement in corporate earnings, short-term market stability and availability of credits. Also, 65% of respondents intend to make cross-border acquisitions in technology, compared to 26% just six months ago.
This attitude is reflected by the increase in volume and value of transactions by 2% and 39%, respectively, in the first quarter of 2019 compared to the same period last year, indicating that higher transactions will occur in the technology sector.
Media and entertainment executives remain optimistic about transactions
The favorable evolution of capital markets and confidence in the positive impact of business transactions generates optimism among media and entertainment companies. 85% of media and entertainment respondents expect an increase in the merger and acquisitions market over the next 12 months compared to 64% in October 2018. Despite the persistence of speculation about macroeconomic and geopolitical instability, most executives (95%) consider the sector's economy improving, an increase from 48% six months ago.
The study also highlights the importance that companies make to the transformation process towards a more agile and flexible organization. Thus, there is an increase in the number of CEOs that review their portfolios quarterly - from 23% to 49% over the past six months. At the same time, 53% of them are determined to make transactions in the following year, a higher percentage than the 10-year average of the study (46%).
M & A indicators in the telecommunications sector are improving, despite regulatory risks
Telecoms executives are optimistic about the ability of mergers and acquisitions to support the alignment of their technology portfolios and the transformation process for growth. 82% of them said the mergers and acquisitions market will grow over the next 12 months, compared to 65% in the same period last year, and 58% predicted that the opportunities generated by the deals will multiply in the coming year.
In the context of the imminent launch of 5G technology across multiple markets, 55% of executives said it plans to make acquisitions in the coming year. Expansion in related sectors is placed as the main strategic development priority for telecom companies (27%), as Internet-related opportunities (IoT) pledge further progress in convergence.
However, the legislative environment continues to pose problems, with 72% of respondents mentioning its influence on trading strategies.