Cost control still a key boardroom priority
TORONTO, April 14, 2014 /CNW/ - According to EY's latest Capital Confidence Barometer, 79% of Canadian executives believe the global economy is improving - up 24% from October 2013. But despite that confidence, companies are still focusing on controlling costs to optimize capital over the next 12 months.
"Canadian executives are much more confident in both the global and Canadian economies than they were just six months ago," says Tony Ianni, Transaction Advisory Services Partner at EY. "In fact, they show some of the most confidence in the global economy of all the countries we surveyed."
Ianni says that confidence means companies are planning on pursuing more M&A activity in the next 12 months.
"Forty-one percent of Canadian executives expect to pursue an acquisition in the next year, up from 33% in October," he says. "There's also more confidence that the valuation gap between buyers and sellers will contract, which means there's a healthy pipeline of transaction opportunities."
According to EY's survey, 66% of Canadian companies have up to three deals in their pipeline, and a surprising 34% are looking at four or more deals.
In addition to an increased interest in deals, the survey found Canadian companies are particularly optimistic about corporate earnings, credit availability and short-term market stability.
"Companies have been - and continue to be - focused internally on optimizing their businesses," explains Ianni. "With stronger balance sheets, they're also now more willing to use debt to finance transactions. That will hopefully help us return to a more traditional level of acquisition interest."
Other key findings from Canadian survey respondents include:
- More than 50% believe access to capital is improving, a 16% increase from a year ago
- 49% believe deal volumes will improve
- 56% are focusing their acquisition capital on emerging markets
- 44% are focusing their acquisition capital on developed or mature markets
"Economic confidence at home and abroad is high, and other fundamentals remain sound," says Ianni. "We've been cautiously awaiting a rebalancing of the capital agenda within the boardroom, and these indicators signal that wait may be over."
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 tenth 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. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
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Image with caption: "EY's latest Capital Confidence Barometer finds Canadian companies are still focused on controlling costs - but M&A appetite is rebounding. (CNW Group/EY (Ernst & Young))". Image available at: http://photos.newswire.ca/images/download/20140414_C9669_PHOTO_EN_39197.jpg
SOURCE: EY (Ernst & Young)
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