EY’s survey of more than 2,000 CEOs globally reveals confidence has returned, but strategic choices will determine future success.
- 54% of respondents plan to prioritize investment in existing business
- 59% will pursue transactions, even after a record-breaking year
- Focus on sustainability vs. quarterly earnings creates tension with investors
54% will prioritise investment in existing businesses, digital transformation and sustainability
As the world enters a new phase in the global Covid-19 pandemic, the majority of CEOs are ready to accelerate plans for investment and mergers and acquisitions (M&A) in their pursuit for growth. These findings come from the inaugural EY 2022 CEO Outlook Survey, which recorded the views of more than 2,000 CEOs across the globe on their prospects, challenges and opportunities.
More than half of respondents (54%) will prioritise investment in existing businesses, digital transformation and sustainability, according to the survey. In addition, more than three-quarters (79%) of respondents have adjusted, or are planning to adjust, their supply chain to help reduce costs and minimise risks to prepare for future disruption.
Following a record year that saw US$5t worth of M&A, transactions will remain a critical tool for CEOs in 2022 complementing other areas of investment. Nearly two-thirds (59%) of respondents expect their companies to pursue acquisitions in the next 12 months – up from 48% at the start of 2021.
EY’s CI Strategy and Transactions Associate Partner, Stuart Gardner (pictured), explains: “Much of this survey points to a sustained high level of M&A activity globally. This will resonate with finance professionals working in the Channel Islands, as the islands continue to be an intermediator of capital.”
What’s the outlook for M&A in 2022?
In the next 12 months, CEOs will be prioritising deals that will improve operational capabilities (26%), and their environmental, social and governance (ESG) positioning and sustainability footprint (20%), according to the survey.
The US, the UK, China, India and Germany are the most favoured destinations for those CEOs looking to pursue an acquisition in 2022. Looking at sectors, technology, health care and advanced manufacturing are the top three sectors more likely to buy assets.
70% expect private equity to be a major acquirer
Asked to identify the top trends in the M&A market in 2022, responding CEOs said that they expect an increase in hostile and competitive bidding (72%), private equity to be a major acquirer (70%), an increase in cross-sector (68%) and cross-border (65%) deal making, as well as more megadeals (56%).
ESG and sustainability concerns are becoming more important for dealmakers, according to the survey. An overwhelming 99% of responding CEOs say they factor these issues into their buying strategies, while 6% of respondents say they have walked away from deals in the past year, due to ESG related concerns about the target.
In a further sign that the pivot toward sustainable transformation among CEOs is becoming a permanent shift in the post-COP26 world, while revenue growth remains a key driver, over three-quarters of respondents (82%) identified ESG factors as extremely important or important, when it comes to strategic decision-making. In addition, 28% of respondents can clearly see the competitive advantage of becoming a leader in sustainability.
Stuart concludes: “As noted in the survey, bold strategies employed now could result in the creation of commercial advantage, competitive agility and market strength, especially within ESG. The abundance of dry powder and the ability to raise debt at what currently remain historically low interest rates could well result in sustained transactional activity both through and within the the Channel Islands in 2022.”