New Delhi: An Ernst & Young study to measure confidence in the global economy said over half of the Indian companies surveyed were optimistic about making acquisitions in the next 12 months due to the improving business climate.
According to E&Y’s ‘Capital Confidence Barometer’, optimism is growing in the Indian merger and acquisition (M&A) space, with focus shifting again from divestments to acquisitions.
“About 54% of (Indian) businesses state they are likely or highly likely to acquire other companies in the next 12 months, almost double that of the number six months ago,” the study stated.
“With greater liquidity, we are seeing companies more willing to make acquisitions that they had previously deferred. With the current environment, we are now observing that there are more potential buyers than willing sellers,” Ernst & Young India partner and national director (Transaction Advisory Services) Ranjan Biswas said.
Confidence in the global economy as a whole is also improving. Forty per cent of respondents globally expect the downturn to end within 12 months, compared to 30% last November, it added. The survey also revealed that 91% of the respondents from India are more optimistic about the local economy, making India the second most optimistic country after Australia (93%).
Interestingly, some of the Western developed markets were the least confident -- France (44%), US (56%) and UK (57%), it found.
In the global study, India had close to 60 respondents, and posted the fourth highest response rate at a country level.
The study also said credit conditions in Bric (Brazil, Russia, India and China) countries have improved significantly over the past six months compared to developed markets, which have experienced a marginal improvement.
Around 86% of businesses in India are now focused on growth, compared to 76% six months ago.
Furthermore, 22% of Indian respondents said funding major capital projects and acquisitions was not a problem for their firms, while 76% of them were expecting it to become available in the next 12 months, the survey added. Refinancing was a sought after method, with close to 40% of the respondents likely to take this route in the next 12 months, it added.
“Cash and debt were primary sources of funding deals for the past 12 months. While this will continue to be so, dependency on bank loans is expected to decline and equity will be more likely used as a source of funding,” Biswas added.