Companies around the world are still reluctant to go on the acquisition trail even though they are becoming more confident about the global economy, a survey found yesterday.
In its half-yearly assessment of the intentions of big companies, accounting and consultancy firm Ernst & Young said the growing optimism has yet to be translated into more investment or corporate deal-making. The survey was based on responses from 1,600 senior executives in 50 countries, 85 percent of which had annual revenues of more than US$500 million.
Ernst & Young found that 51 percent of the executives questioned think the global economy is improving — more than double the level recorded in October last year. Under normal circumstances, that would translate into companies feeling more confident to splash out on mergers and acquisitions (M&As). However, the survey only found that 29 percent of companies expect to do a deal in the coming year.
When asked how they would expand the business if they had enough cash, 45 percent said they would sooner invest in-house than buy up another organization.
“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.”
Despite the occasional big deal, such as the merger of commodities trading group Glencore International PLC and mining company Xstrata PLC and the US$25.5 billion bid for Sprint Nextel Corp by satellite TV company Dish Network Corp, the amount and value of corporate deals are still down on the levels that existed before the start of the financial crisis in 2007-2008.
The crisis paved the way for the deepest global recession since World War II, that saw bankruptcies rise and turned many executives risk-averse — pushing them to reduce their debt levels and increase the amount of cash they held.
The recovery since the start of the crisis has been patchy with many regions, including much of Europe and Japan, still struggling to show any economic growth.
Even so, there are some bright spots, according to the Ernst & Young survey. In Brazil, for example, the firm found that 45 percent of executives plan to make a deal over the coming year. That compares with 29 percent in the US, 27 percent in the UK and 12 percent in Russia.
The survey found that China remains the No. 1 investment destination, followed by India and Brazil. The US is also in the top five along with Canada.
Among sectors, the survey found that technology, automotive, life sciences, consumer products and oil and gas, remain the most likely to see deal activity, with sectors such as mining and utilities bringing up the rear.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the