UK holding 
back on 
investing 
in global 
mergers

Three-quarters of the firms in the survey expect deals to rise in next 12 months, yet only 27 per cent plan acquisitions of their own. E&Y said a major rebound in confidence in the global economy is not yet translating into M&A activity.

Based on a survey of 1,600 senior executives, the report reveals that 93 per cent of British companies view the global economy as stable or improving.

The surge in confidence has been fuelled by positive expectations around global economic growth, corporate earnings and credit availability.

This increased confidence has created a strong consensus among UK corporates that M&A volumes will increase – 75 per cent expect global deal volumes to rise over the next 12 months.

However, only 27 per cent of major companies expect to make acquisitions in the same period.

Mark Clephan, Yorkshire M&A Director at Ernst & Young, said: “Business leaders have confidence in the global economy with the fundamentals such as, improving credit conditions and realistic valuations, there to support these deals.

“But, this is not translating into widespread capital investment and M&A activity. What we are seeing is a ‘confidence paradox’ with planned activity contradicting expectations.

“While three-quarters of corporates expect deal activity in the market to increase over the next year, far fewer have an intention to buy. This could create an opportunity for bold executives to secure prime assets and steal a march over the competition.”

Around 37 per cent of companies said quality acquisition opportunities are available, up from 33 per cent six months ago.

Some 52 per cent feel more confident about the number of opportunities available, up from 40 per cent six months ago.

The top five destinations where UK corporates are most likely to invest are India, South Africa, United Arab Emirates, Germany and France.

Mr Clephan said: “It is surprising not to see more of the BRIC nations and other emerging markets on the radar for UK corporates, where demand and opportunities are far higher than traditional Western European markets.”