Canadian companies still showing caution around deal making
TORONTO, Nov. 21, 2013 /CNW/ - For the first time in two years, US
companies are more inclined to pursue deals than their Canadian
counterparts. According to EY's latest Canadian Capital Confidence Barometer, only 33% of Canadian companies intend to pursue acquisitions within
the next 12 months, compared to 41% in the US.
"There's still an interesting 'confidence paradox' going on here.
Canadian executives remain confident in the state of the global
economy, and even more confident in the economy here at home," says
Tony Ianni, Transaction Advisory Services Partner at EY. "But that
confidence still isn't translating into an uptick in transaction
Accordingly, Canadian executives' confidence in the local economy
continues to rise. Ninety-eight per cent of respondents think the
Canadian economy is stable or improving, up from 79% a year ago, and
85% just six months ago. But deals remain comparatively elusive.
"A lot of things are fueling this paradox. Despite increasing
confidence, Canadian companies either seem to be waiting for more
favourable economic conditions, for the right deal or, in some cases,
for someone else to make the first move," says Ianni.
Still, while deal volume may be down, the survey found a significant
increase in the number of respondents who expect an increase in the
actual size of deals that do go ahead. That's quite a shift from EY's
findings last spring.
"Nineteen per cent of executives said they expect deals over US$1
billion," says Ianni. "Just six months ago, no respondents expected any
deals of that magnitude."
Ianni says companies' willingness to use debt and equity to fund deals
is consistent with the perception that deals will shift away from
Despite less interest in making deals, Canadian executives' increased
confidence in the local economy is driving other positive growth.
Forty-seven per cent of companies say they'll create jobs or hire
talent in the next 12 months, up from 37% six months ago. And only 8%
said they would be reducing their workforce, down 5% from April 2013.
Other key findings of the survey include:
81% view credit availability as stable or improving
63% consider growth their primary focus
44% have a greater focus on investing in emerging markets
48% expect Canadian deal volumes to improve
61% plan to use debt and equity as their primary source of deal funding
About the survey
EY's Capital Confidence Barometer is a survey of more than 1,600 senior
executives from large companies around the world and across industry
sectors. The Barometer's objectives are to gauge corporate confidence
in the economic outlook, understand boardroom priorities over the next
12 months and identify the emerging capital practices that will
distinguish companies that build competitive advantage as the global
economy continues to evolve. This is the ninth twice-yearly Barometer
in the series, which began in November 2009.
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust
and confidence in the capital markets and in economies the world over.
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all of our stakeholders. In so doing, we play a critical role in
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For more information, please visit ey.com/ca. Follow us on Twitter @EYCanada.
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SOURCE: EY (Ernst & Young)
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