The intentions of materializing short-term transactions are the most numerous among companies with incomes higher than USD 1 billion (65% of respondents say they are planning a purchase for the next 12 months), which usually allow them to allocate more resources for mergers and acquisitions than companies with less than $ 1 billion (23%) of revenue.
Rapid regulatory and policy changes cause some companies to suspend their trading intentions, re-evaluate their impact and increase their lobbying efforts. As such, 49% of executives said government or regulatory interventions, competitive or antitrust reviews, the increased protectionism and trade policy constraints were the main causes that led to the failure of transactions.
The study Global Capital Confidence Barometer also shows that executives know how to impose discipline to abandon certain transactions when difficult conditions prove that they no longer make sense. 96% of respondents said they canceled or did not end a transaction in the last 12 months - a percentage increased from 76% reported in the previous EY study.
The impact transactions continue in the technology sector
Intensifying the innovation process and increasing demand for more and more specialized products is leading to continued high potential for industry transformation, despite low global appetite for acquisitions - 40% of technology executives say they intend to make acquisitions over the next 12 months. Although the volume of transactions was slightly lower, the total value of transactions recorded by the end of 2018 increased by 42% compared to the same period in 2017.
Given that the major economic indicators are stable or even improving, the interest of the private investment funds (PE) for technology companies remains high, and cross-sector buyers are looking to gain competitive advantages by buying assets in technology, transactions in the sector have all the conditions to keep up with the current pace.
Media and Entertainment executives (M & E) maintain their appetite for mergers and acquisitions despite the constraints imposed by sectoral policies
It is estimated that the high level of mergers and acquisitions in the media and entertainment sector will continue, given that 100% of respondents expect the trading environment to improve or remain stable for the next 12 months. This enthusiasm is based on the trust of the executives in corporate earnings, the availability of credits and the increase in the value of their own shares - 95% of those surveyed are saying that they will improve or remain at the same level in 2019.
However, the constraints imposed by sectoral and competitive policies have led some of the media and entertainment executives to give up certain transactions. Most of those surveyed (94%) canceled or failed to complete a transaction in 2018. In almost half of these cases (48%), the main causes of the failure were the constraints imposed by regulatory measures, sectoral and antitrust policies.
"Mergers and acquisitions remain a central strategy for media and entertainment companies, especially for medium and large companies, because they are looking to get the best out of content, talents and capabilities. We expect the intense pace of the transaction to continue, although there are only limited growth conditions now, "said Will Fisher, Head of Global EY department of consultancy in transactions in the media and entertainment sector.
The competition in telecommunications procurement is on the rise
Telecom executives are facing growing competition to meet acquisition targets amid improvements in their prospects for mergers and acquisitions. 74% of those surveyed said that they expected a rise in competition in the next 12 months, determined primarily by the appetite for infrastructure assets of private equity funds and corporate investment funds.
The outlook for mergers and acquisitions in this sector will improve, according to 76% of the surveyed executives. However, the constraints imposed by regulatory measures will continue to represent challenges for the closing transactions, 47% of the respondents are considering them as the biggest threat.