CFOs expect rise in strategic M&A despite economic woes
by Caroline Clayfield
The state of the US and European economies is filling no one with confidence at the moment. However, the results of a new survey of chief financial officers the world over suggests some surprisingly bullish attitudes.
Some 95 per cent of the 750 mid-cap CFOs operating in 13 countries surveyed recently by BDO said they felt confident about their overseas expansion prospects. Although the CFOs said they were fully aware of the challenges they could face when expanding internationally, almost all were still feeling confident about the prospect.
BDO’s Global Ambitions Survey found that 44 per cent of the CFOs questioned expected almost half of their revenues to come from their business abroad within three years. This confidence comes despite admitting that they are somewhat concerned about finding the right talent in their target markets overseas.
More than half of the respondents cited skills shortages as their main obstacle to expansion, while 69 per cent said they were not concerned about raising the capital needed to fund deals, further cementing claims that businesses are sitting on piles of cash that have been growing during the quiet – with regards to dealmaking at least - recession years.
So which markets do these businesses want to expand into? Most of the CFOs questioned have their sights set firmly on the largest markets with the greatest opportunity for growth. China came out on top, as it is seen as the market with the most medium and long-term potential. However, China is also seen as one of the most challenging markets in which to operate. CFOs cited local competition and red tape as the most daunting obstacles to circumvent or deal with when expanding overseas.
The US and Germany were the other top target markets for expansion, according to the BDO survey. Martin van Roekel, chief executive officer at the accountancy firm, was keen to conclude that business leaders are wising up to the importance of completing full and thorough preparation, research and due diligence before embarking on an overseas deal. He explained, “Our research shows that an overwhelming number of CFOs are confident and surprisingly optimistic that their business will continue to expand internationally.”
“They recognize the importance of conducting proper research, seeking good, solid advice and, above all, of having talented local people on the ground,” he added.
From a US-specific perspective, a BDO poll of 100 CFOs at leading retailers in America over the past month or so has also unearthed some surprisingly positive attitudes toward M&A and also toward business in general.
The general consensus was that although consumer confidence has certainly dropped, this is not having as strong an impact as expected on what consumers are actually spending. As a result, US retail CFOs are confident that the number of mergers and acquisitions in the industry will increase in the coming year. Even more interesting is the fact that they think more than half of these deals will be carried out by retailers themselves, rather than financial buyers, who have dominated the industry’s M&A market in recent years.
In conclusion, it is a fascinating time for M&A both in the US and globally, as despite ongoing pessimism about the recovery of the US and European economies, CFOs are still extremely keen to grow their businesses. However, caution and preparation have rarely been as vital, as now, to the success of a deal.