Executives still too worried for deals: Ernst & Young

Sun Apr 22, 2012 7:16pm EDT
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By Michael Erman

NEW YORK (Reuters) - Corporate executives are hesitant to pull the trigger on new acquisitions despite indicating they believe the global economy is improving somewhat, according to a survey of more than 1,500 executives polled by Ernst & Young.

Only 31 percent of the executives polled for Ernst & Young's sixth "Global Confidence Barometer" survey said they expected to pursue an acquisition over the next 12 months -- the lowest level since the firm started the survey in 2009.

That is down from 41 percent of the respondents in the previous survey, which was released in October 2011.

"There's a view after two and a half years of sustained volatility that this is not your typical recession, therefore, where possible (executives) will opt for safer, more conservative routes to create value," Pip McCrostie, global vice-chair of transaction advisory services at Ernst & Young, said in an interview.

The survey, while forward looking, reflects an already weak market for mergers and acquisitions activity. The first quarter of 2012 had the least amount of M&A activity of any quarter in seven years, and year-to-date worldwide M&A activity is down roughly 32 percent.

More than half of the executives, who came from 57 countries and 40 sectors, feel the global economy is moderately improving.

"It's a modest increase in confidence," McCrostie said, noting that improved employment and access to credit were two important factors in boosting the executives' perception of the economy as a whole.

Still, McCrostie said that worries about the Eurozone, persistent volatility, austerity measures and potentially slowing growth in emerging markets are weighing on executives and holding down their enthusiasm for acquisitions.   Continued...

The logo of Ernst & Young is seen at their headquarters in New York December 20, 2010. REUTERS/Lucas Jackson