Survey Indicates Improved Global Economy as M&A Perks Up

Survey Indicates Improved Global Economy as M&A Perks Up
Bernadine Racoma

An expected upturn in the business sector will place the world economy at a better spot in the coming months. This foreseen improved global economy was revealed from the result of a survey recently conducted among 1,600 industry executives from leading companies in the world.

Mergers and acquisition

In its bi-annual report on mergers and acquisitions (M&A), consulting firm Ernst & Young stated that there will be a marked increase in the acquisition and consolidation activities among companies, a move that will likely point to an enhanced mood in the trade department. The survey noted that 35% of the respondent companies have expressed their intention to work toward acquisitions. This is a big improvement from the 25% purchases made in the previous year. The positive sign on the picking up of global economy in the M&A sector is attributed to the regained confidence in the investment side and the emerging of a more stabilized and mature market condition.

Solid growth

According to Pip McCrostie, M&A global head of Ernst &Young, cautious watch on world economy and the uncertain faith among business people have started to loosen up in the past months. Many countries are now rising from recession and the currency value in these areas has gained a healthier condition. Earlier agitation on China’s decline is now put in the back burner. Meanwhile anticipation on the solid growth of the U.S. economy is spreading notwithstanding the just ended government shutdown and budget deadlock that almost caused a total downfall in its economy.

Debt and equity

More positive assurance from the recently conducted survey among business groups signifies a 22% improvement in global economy in 2014. Many companies are forecasted to avail of debt and equity instead of cash, implying that more traders are ready to take chances despite the risks. This development is expected to result to extended investments in the near future that will likely create a more active commerce worldwide.

Previous economic crisis

The global economic crisis that started in 2007 has caused an international recession to the detriment of the fiscal situation everywhere. A huge number of companies all over the world withdrew their investments from the more risky ventures and proceeded to restructure their finances. Debts were settled and companies that wanted to secure their investments rebuilt their cash positioning. Mergers and acquisitions were put aside while trade volumes and values dipped intensely. Companies held on to their valuable assets, not wanting to risk on new funding. Despite the ability to acquire credit, they used their cash reserves to settle their obligations. With more business entities backing out from many ventures, economy became out of hand.

Stock market advantage

The foreseen economic boon places the stock market at a big advantage. Already, new transactions are coming up in the M&A department such as the deal on Vodafone. The company recently sold its 45% of its shares for $130 billion in Verizon Wireless to Verizon, a contract that will be concluded next year. Just last week, McKesson, a wholesaler of pharmaceutical products based in San Francisco, agreed to buy out a German company Celesio at a value of $8.3 billion.

Leading risk-takers

In the event of increased M&A activities next year, the countries predicted to be leading risk-takers are U.S., Canada, China, Brazil and India. Majority of the upcoming investments will be poured in consumer products, automotive, technology, oil and gas and life sciences and research.

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