Mixed M&A messages result from an economy characterized by "haves" and
TORONTO, April 28 /CNW/ - Some 78% of Canadian businesses are feeling
more upbeat about their companies' prospects than they were six months
ago, says a new Ernst & Young report, Capital Confidence Barometer. In contrast, 70% of their global counterparts feel the same way about
their own businesses. But it's not all smooth sailing the report finds.
"Overall, Canadian companies can afford to be a bit more optimistic than
others. Our markets have done fairly well relative to others, and
commodities prices are now soaring," says Tony Ianni, a partner in
Ernst & Young's Transaction Advisory Services practice. "But that
optimism varies among sectors and regions. Companies that weathered the
financial storm well are now on the prowl for new acquisitions and
opportunities. Businesses that were hardest hit are turning inwards,
choosing to focus on operational efficiency, organic growth."
Ianni compares booming commodities businesses in Alberta to
still-struggling manufacturers in Ontario as a key example. "In many
ways, the post-crisis Canadian economy is characterized by 'haves' and
'have nots.' This is leading to mixed messages for M&A." He says the
haves are flush with cash and have access to available credit. The
survey finds one-third of them are looking to buy. The have-nots, on
the other hand, are still struggling to get access to credit, are
looking to sell or are cleaning up their balance sheets to make
themselves more attractive to buyers.
As a result, Capital Confidence Barometer finds that Canadian M&A activity is expected to remain relatively flat in the next
six months in contrast to the global trend, which anticipates a slight
3% uptick. Those with acquisitions in their sights don't necessarily
have an easy road ahead, however. New hurdles exist for M&A activity:
The valuation gap between buyer and seller expectation is widening, with
close to 50% of Canadian companies surveyed calling it a mounting
concern and a deal-breaker.
Political unrest in areas like the Middle East is complicating long-term
Ongoing economic uncertainty in Europe and China are making it difficult
for companies to develop big picture strategies.
Good assets are scarce, leading to greater competition and ever-higher
Over the long term, Canadian M&A activity is expected to decline
slightly. The report finds 48% of Canadian businesses are likely to
acquire in the next one to two years, down from 51% in October 2010.
Global respondents showed a more dramatic decline. Forty-four percent
of respondents worldwide said they plan to acquire in the next year or
two, down from 54% in October 2010.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 141,000 people are united by our
shared values and an unwavering commitment to quality. We make a
difference by helping our people, our clients and our wider communities
achieve their potential.
For more information, please visit ey.com/ca.
Ernst & Young refers to the global organization of member firms of Ernst
& Young Global Limited, each of which is a separate legal entity. Ernst
& Young Global Limited, a UK company limited by guarantee, does not
provide services to clients.
For further information: