Firms aren't interested in mergers and acquisitions, study finds

Erring on the side of caution seems more important than boosting innovation or research by purchasing firms for many businesses.

Erring on the side of caution seems more important than boosting innovation or research by purchasing firms for many businesses.

According to a study by accounting and consultancy firm Ernst & Young, businesses are less concerned with acquiring other firms which could improve their own products lines and services, and are far more worried about maintaining stability in the light of the global economy.

In the half-yearly assessment, the company said that even though corporations are now more optimistic about their economic prospects, this is yet to translate into enthusiasm over acquisitions. Based on responses from 1,600 senior executives in 50 countries -- and 85 percent of firms with annual revenues of more than $500 million -- the report suggests that even though business leaders now feel more comfortable, more investment or corporate deal-making is low on the priority list.

51 percent of executives questioned think that the global economy is on the road to recovery, but only 29 percent of those surveyed plan to explore a buyout or investment deal in the coming year. Rather than looking for external investment opportunities, 45 percent stated that if the business had the funds, they would spend such resources in-house.

"The current situation can best be described as a 'confidence paradox'," said Pip McCrostie, global head of transactions at the firm. "In the past few years, global M&A volumes have de-coupled from historical indicators. Executives are continuing to wait for a sustained recovery before engaging in M&A [mergers and acquisitions]."

Although recovery has been patchy across the globe, China remains the number one destination for investment, followed by the developing economies of India and Brazil. The survey found that the technology, automotive, life sciences, consumer products and oil and gas industries are most likely to see deal activity in coming years.

Read more: Yahoo

Image credit: Flickr

This post was originally published on Smartplanet.com

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