Going through volatility and uncertainty while trying to find digital Magazine

Despite high levels of volatility in capital markets and uncertain economic growth, global deal making held its ground inside the first 50 % of 2016.

While headline deal value fell by 18% inside the first six months, as opposed to same period in 2015, the shortfall was almost entirely driven by eight fewer megadeals. This year’s deal value can be flat against 2014 but up 35% against 2013.

Steve Krouskos, EY Global Vice Chair C Transaction Advisory Services, said: “Businesses need growth to meet investors and C oftentimes C organic options alone will not be providing enough momentum. Furthermore, disruptive change across the whole business landscape is intensifying competition and impacting core business models. Doing nothing is not a solution for most companies when they take a look at seize competitive advantage, bolster growth prospects and manage costs through deals.”

EY analysis finds the outcome from the recent EU referendum in britain may have an impact on M&A activity globally from the short-term. In Europe, a time of uncertainty may even see companies in england as well as EU wait on near-term investments till the future path is much more certain.

At the same time, acquisitions of UK and EU assets and corporations by US and Asia-Pacific organizations could accelerate, in case the relative values of IP-rich assets by using a global client base be attractive. This could be possibly seen in we have, industrial, life sciences and consumer products sectors in great britain and wider EU.

“There will ultimately be some short-term uncertainty for businesses in Europe since they navigate the complex implications within the UK leaving the EU,” said Krouskos. “However, the british isles remains open for business as well as the longer-term strategic rationale to carry out deals will underpin activity.

“Additionally, in our inter-connected and globalized market any short-term uncertainty may even likely create M&A opportunities for companies further afield contemplating investing in the market at what might be at attractive prices.”

Illustrating the changing dynamics of global M&A, 2016 has witnessed a completely new record set by Chinese companies acquiring overseas.

“In comparison to its China outbound deals, the 1st a few months of 2016 alone have surpassed the main of 2015 C which itself would have been a record,” said Krouskos. “Modified growth both at home and the government’s efforts to guide Chinese companies’ expansion plans have propelled firms to obtain overseas to aid provide the domestic economy and prosperity.”

One area that Chinese companies have renewed focus is incorporated in the purchase of industrial robots and related software, especially targeting European companies. China is already our planet’s largest user of commercial robots. It now seems to be if China is seeking to become the leading supplier and also it hunts out technology across the globe.

According to EY’s Digital Deal Economy study more than 600 non-technology business people, also released today, nine outside of 10 businesses globally now say they face increased competition from firms that have embraced digital.

Bolstering the prospects of global M&A, case study also finds that just about two thirds of executives (67%) arrange to acquire digital capabilities in the next 24 months while they turn to transform their businesses.

The survey demonstrates that executives notice that digital transformation is impacting all aspects of their business C within the front-end for the back-end. In addition they realise that the competitive landscape has been evolving rapidly as barriers to entry are eroded by new technologies.

Krouskos said: “The critical question for you is can companies build the capabilities instructed to reach your goals in the brave marketplace C or do they really will need to buy? The majority of executives are opting to get, recognizing that attempting to achieve digital transformation through organic means alone may very well be not fast enough.

“Technological advances always drive sector convergence and turbo-charge changing consumer behaviours. This is often compelling companies to take forward-looking, deal centric strategies to confirm they future proof themselves to get a digital world.”

The trend of non-tech companies acquiring assets inside the technology sector continued during the first half 2016 as businesses look to the effectiveness of digital to accelerate their growth.

Alliances are progressively more attractive C alongside or maybe in location of acquisitions C as companies find new digital capabilities. Based on EY’s study, 1 / 3 of executives now will create alliances and partnerships within the next 2 yrs.

“Nearly 90% of executives have elevated digital transformation within their capital allocation strategies and acquiring innovation is a preferred route,” said Krouskos. “Executives are concluding that this best approach to get their digital goal could be to help make sure all investment decisions retain the future vision to your digitally-enabled business. A future-proofed digital capital strategy is the primary focus of obtaining an electronic world.”