Nearly half of CEOs have 'high M&A appetite': KPMG

Dive Brief:

Nearly half (49%) of U.S. CEOs “have a high M&A appetite and will likely undertake acquisitions that have a significant impact” on their companies during the next three years, KPMG found in a survey of 1,325 CEOs worldwide, including 400 chief executives in the U.S.
Looking ahead to the next three years, the CEOs flagged as top risks tax, supply chain, reputation, climate and cybersecurity, KPMG said, describing results from the survey of chief executives in 11 countries from June 29 until Aug. 6.
“CEOs are striking the delicate balance of driving a growth strategy inclusive of M&A that is aligned with their ESG and digital strategies, while still leading their organizations through uncertainty caused by the ongoing COVID-19 pandemic,” Paul Knopp, KPMG U.S. Chair and CEO, said in a statement.

Dive Insight:

U.S. and worldwide deal-making hit record highs during the first six months of this year as buyers took advantage of record-low interest rates, Refinitiv said. The $1.3 trillion in U.S. deal value accounted for 47% of the $2.8 trillion total worldwide during the period.

Robust deal-making in North America will probably persist “as cash-rich companies, fueled by low borrowing costs, look to expand during the economic rebound,” S&P Global Market Intelligence said in a report. Companies during the second quarter announced 5,712 deals with targets in the U.S. and Canada valued at $604.5 billion.

“Acquisitive companies have been on a tear of purchases since September 2020 as government spending and supportive monetary policy removed the risk of mass defaults,” S&P Global said. Despite the Biden administration’s pledge to curb anti-competitive business practices, “the conditions supporting the breakneck pace of deal-making appear primed to last.”

Deal-makers can draw on abundant capital. Leading stock indexes in the U.S. have recently hit record highs and the Federal Reserve recently pledged to hold the benchmark interest rate at a record low as it considers when to begin tapering monthly purchases of $120 billion in bonds.

Thirty-seven percent of CEOs “have a moderate M&A appetite and will make acquisitions that have a moderate impact” on their companies, according to KPMG.

Other findings include:

77% of CEOs said the 15% minimum global corporate tax promoted by the Biden administration and endorsed in June by 130 countries poses a “significant” challenge to their growth goals;
only 11% of CEOs said their companies are well prepared for a cyber attack, and 65% have a plan to respond to a ransomware attack;
75% said they need to speed up the shift to digital opportunities and divest businesses that face digital obsolescence, while 77% characterized their digital investment strategy as “aggressive,” or aimed at securing first-mover or fast-follower advantages;
52% said they face “significant demand” from stakeholders for increased reporting and transparency on environmental, social and governance (ESG) issues;
82% said the pandemic has prompted them to shift their focus toward the social aspects of ESG;
59% of CEOs said they will consider shared office space to allow greater flexibility toward remote work, and 26% have already shrunk their office footprint.

KPMG surveyed chief executives in Australia, Canada, China, France, Germany, India, Italy, Japan, Spain, U.K. and U.S. Annual revenue at one-third of the companies exceeded $10 billion. Revenue at all the companies exceeded $500 million.