By Michael Erman
NEW YORK, Oct 7 (Reuters) - Executives are more downbeatthan they have been in years about the prospects for corporatedealmaking, citing worries about the euro zone and softening inemerging markets, according to an Ernst & Young survey releasedon Sunday.
Just 25 percent of the executives polled for Ernst & Young'sseventh Global Confidence Barometer said they expect to pursuean acquisition over the next six months, in the most pessimisticoutlook since the firm started the survey in 2009.
"We are looking at low or stagnant growth for quite a numberof years to come," Pip McCrostie, global vice chair oftransaction advisory services at Ernst & Young, said in aninterview. "People are thinking, 'I want to be much moreconservative, much more risk averse.' That leads to a drop inthe M&A appetite and a drop in the desire to sell."
Ernst & Young polled more than 1,500 executives for thesurvey, more than half of whom were chief executives, chieffinancial officers or other high level executives. Thosesurveyed were from 41 countries and spanned 24 differentsectors.
The survey mirrors the decline in dealmaking seen this year.There have been roughly $1.7 trillion in deals announced so farthis year, down 14 percent from last year, according to ThomsonReuters data.
The decline in deals has come even though the tools to driveactivity higher have been in place for some time. Record cash oncorporate balance sheets and cheap financing for borrowersshould make M&A a highly attractive tool for growth.
Executives, however, are still pessimistic about the globaleconomy. Only 22 percent of respondents believe the economy isimproving, down from 52 percent in April. Around two thirds ofthe executives surveyed believe the current global economicdownturn will last more than a year, including 15 percent whobelieve it will extend more than two years.
"There is a much greater understanding about the scale,severity and impact of the euro zone," McCrostie said. "Peoplehave realized it's not just regional, it's not counterpartyrisk, it's a global issue."
Growth has become less of a priority for the executives,according to the survey. Only 41 percent said growth would betheir top priority, with 31 percent saying they would look tocut costs and become more efficient, and 25 percent looking tojust maintain stability.
Still, companies are not looking to sell off non-coreassets. About 19 percent of the executives said they werelooking to make divestments in the next year, down from 31percent in April.
The sectors in which executives said they were most likelyto pursue deals included industrial products, financial servicesand oil and gas. Respondents from the automotive and technologyindustry were least likely to say they would pursue deals soon.
(Editing by Leslie Adler)
((michael.erman@thomsonreuters.com)(+1 646-223-6021)(ReutersMessaging: michael.erman.thomsonreuters.com@thomsonreuters.net))
Keywords: DEALS ERNST&YOUNG/