Technology executives temper their economic optimism and trend toward alliances in low-growth economy
- 84% of technology executives surveyed expect global economic stability or modest growth in 2016
- Only 52% project M&A growth in the sector, down from 80% six months ago
- 40% of executives are planning alliances to create value from underutilized assets
Apr 26, 2016, 08:00 ET
NEW YORK, April 26, 2016 /PRNewswire/ -- Global technology dealmaking is marked by the twin forces of digital disruption and a prolonged low-growth economy, according to EY's 14th biannual Global Capital Confidence Barometer (CCB) – Technology, which surveyed 182 technology leaders around the world, 55% of them C-level executives. While 84% of technology executives see a stable or modestly improving global economy, only 1% are projecting strong economic improvement, compared to 39% six months ago.
Technology sector confidence in dealmaking is moderate, with 43% of those surveyed expecting M&A activity to continue at a stable level this year. Only 52% see growth in this area, a noticeable decline compared with 80% of respondents who projected growth in the previous CCB report, published six months ago.
Jeff Liu, EY's Global Technology Industry Leader, Transaction Advisory Services, says:
"Technology executives have generally accepted that global economic growth is unlikely to accelerate in the near term and most businesses are revising their strategies accordingly. Low-growth prospects are adding impetus to new kinds of technology alliances, beyond classic M&A and joint ventures, reflecting the need to do more with less to innovate and grow in sluggish times."
With cost reduction and regulatory oversight at the top of boardroom agendas (both at 41%), the sector is seeing a growing trend toward sharing economy business models and what EY terms "industrial mash-ups." This is a new form of dynamic and increasingly automated alliance-building that brings sharing economy benefits to the business-to-business (B2B) market. In fact, 40% of technology executives are planning alliances to create value from currently underutilized assets.
Despite lower M&A expectations, there is no current sign of a downturn in the technology sector. Technology M&A volume rose 2% year-over-year (YOY) in the first quarter of 2016 to 1,002 deals, even after record-setting levels in 2015, according to EY's recent Global technology M&A report. Quarterly value fell 14% YOY, but still ranked among the top 10 highest-value quarters ever.
Liu says: "Dealmaking will certainly continue to reshape the technology industry. While deal pipelines remain robust, diminishing perceptions of the quality and closability of M&A deals means the route to new types of dealmaking is opening up. Going forward, expect to see technology executives pursue growth more dynamically via alliances and mash-ups, as well as structurally through M&A."
For a full copy of Global Capital Confidence Barometer – Technology, visit http://ey.com/ccb/technology.
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About the Global Capital Confidence Barometer – Technology
The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY's framework for strategically managing capital. The Barometer is a regular survey of senior executives from large companies around the world, from many industries, conducted by the Economist Intelligence Unit (EIU). In February 2016 and March 2016, we surveyed more than 1,700 executives in 45 countries. In this survey, we had 182 respondents from technology companies, of which 55% were CEOs, CFOs and other C-level executives. A full copy of the report is available at ey.com/ccb/technology.
Virginia Milazzo
EY Global Media Relations
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SOURCE EY