Acquisition activity is set to increase as more Australian companies are now seeking to make acquisitions in the next six months, according to the latest bi-annual Capital Confidence Barometer released today by Ernst & Young.
The findings, based on a survey of more than 800 executives around the world, showed 45 per cent of Australasian respondents intend to transact in the next six months, up from 29 per cent six months ago.
Ernst & Young Oceania leader for transaction advisory services, Graeme Browning, said companies are cashed-up and looking to invest, following 12 to 18 months of preserving and raising capital.
"What we're already seeing is companies getting ready to transact," Browning said.
"Our transaction teams are busy and there is a lot of work in the system. Corporates are divesting non-core divisions and others are looking for the growth and synergies that bolt-on acquisitions bring," he said. "We are starting to do a lot more work around IPOs and private equity are cashed up and keen to get back in the game.
"I think over the course of the next couple of months we will see quite a lot happening. Once it begins, it will snowball. It is definitely building - you can feel a momentum that is very real."
According to Browning, coming out of the global financial crisis, a lot of companies are feeling a great need to be very disciplined and clear about their strategy is, in terms of what they represent, what markets they want to be in and what part of that market they want to be in.
A finding highlighted by Browning was that companies are now spending more time preparing for an acquisition. He said companies are looking at the risks, how to manage those risks, what synergies might be available and spending a lot more time at the pre-deal stage.
"Buyers are wanting to do more to understand acquisition synergies, as well as the risks. Planning for the post-deal integration is happening up-front, it's a very robust process.
"Then at the post-deal stage...they are wanting to put more effort into the implementation - the integration of the assets they've bought. So that's a more disciplined approach that will require different things from lawyers."
Other key Australasian figures in the Capital Confidence Barometer include:
- Ninety-two per cent of Australasian companies are optimistic about the strength of market opportunities at home.
- Eighty per cent view the future of their business as robust, with many reporting confidence in the effectiveness of their capital structures and an easing of liquidity restraints.
- Forty-two per cent indicate their business has no difficulty obtaining access to finance, with the remaining 58 per cent believing access to finance will open within the next six months.