Over half of CEOs to step-up investment and M&A in 2022, but headwinds remain
PR94038
LONDON, Jan. 12, 2022 /PRNewswire=KYODO JBN/ --
- EY 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
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 prioritize 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 minimize
risks to prepare for future disruption.
Following a record year that saw US$5t worth of M&A [https://dealogic.com/],
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.
CEO investment plans, however, could be thrown off course due to external risks
to their business. A majority of the surveyed CEOs (87%) appear worried about
rising input prices and identify trade tensions (18%), the impact of climate
change (17%) and increasing competition from challengers (13%) as the most
critical risks to the future growth of their businesses.
Andrea Guerzoni, EY Global Vice-Chair – Strategy and Transactions, says: “CEOs
are ready to be on the front foot when it comes to investment. At the same time
the impact of the fragile global environment and the increasing cost of doing
business across the board, from rising inflation to rocketing energy costs, is
keeping them up at night.
“Deals will remain a key lever in CEOs’ investment toolkit. Coming off a
record-breaking run for M&A, many CEOs will be focusing on integrating assets
acquired over the past 12 months, but CEO acquisitive intentions should ensure
continued deal activity at high levels in 2022.”
What’s the outlook for M&A in 2022?
In the next 12 months, CEOs will be prioritizing 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 favored 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.
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%) dealmaking, 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.
Guerzoni, says: “CEOs see M&A as a critical accelerant for long-term growth
strategies. As ESG and sustainability concerns are becoming critically
important, the market in 2022 is also expected to be fueled by M&A aimed at
helping CEOs realize their sustainability strategy goals faster.”
Cost of focus on sustainability creates CEO tension with some investors
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.
At the same time, however, 65% of respondents admit that they have encountered
resistance from investors and shareholders about their sustainability
transition strategy; and almost a quarter (21%) say that investors are not
showing support for long-term investment plans, or that they are fixated on
quarterly earnings.
Guerzoni, says: “CEOs are ready to set their organizations on a course that
should deliver sustained benefits for shareholders and society. What stands out
is the need for alignment between CEO thinking and that of investors, when it
comes to prioritizing sustainability. Resistance from investors and
shareholders because of high costs and doubts over long-term returns, can
derail CEO plans and land their organizations on the wrong side of history.”
To read the full report, please visit: ey.com/ceosurvey
Notes to editors
About EY
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This news release has been issued by EYGM Limited, a member of the global EY
organization that also does not provide any services to clients.
About the EY 2022 CEO Outlook Survey
The EY 2022 CEO Outlook Survey is the benchmark of CEOs’ sentiment on global
challenges, growth and sustainability strategy, portfolio optimization and M&A.
It aims to provide valuable insights on the main trends and developments
impacting the world’s leading companies as well as business leaders’
expectations for future growth and long-term value creation. It is a regular
survey of senior executives from large companies around the world, conducted by
Thought Leadership Consulting, a Euromoney Institutional Investor company. The
panel comprises select EY clients across the globe and contacts and regular
Thought Leadership Consulting contributors.
Between November and December 2021, Thought Leadership Consulting surveyed on
behalf of the global EY organization a panel of more than 2,000 CEOs in 53
countries and across 14 sectors. Respondents represented the following sectors:
financial services, telecoms, consumer products and retail, technology, media
and entertainment, life sciences, hospital and health care providers,
automotive and transportation, oil and gas, power and utilities, mining and
metals, advanced manufacturing, and real estate, hospitality and construction.
Surveyed companies’ annual global revenues were as follows: less than US$500m
(20%), US$500m–US$999.9m (22%), US$1b–US$4.9b (31%) and greater than US$5b
(28%).
Organization’s global headcounts were as follows: less than 999 (9%),
1,000–4,999 (39%), 5,000-9,999 (15%), more than 10,000 (37%).
The CEO Imperative series provides critical answers and actions to help CEOs
reframe their organization’s future. For more insights in this series visit
ey.com/en_gl/ceo
Contacts:
Konstantinos Makrygiannis
EY Global Media Relations
+44 77 6893 0056
kmakrygiannis@uk.ey.com
Chloe Walford-Smith
EY Global Media Relations
+44 78 5989 0337
Chloe.walford-smith1@uk.ey.com
Source: EY
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