M&A

11 November, 2009

One third of firms plan M&A within 12 months-poll

* 71 pct of execs see acquisition opportunities

* Only 33 pct expect to execute deals over 12 months

* U.S., India, China top list for wanted overseas deals

LONDON, Nov 11 (Reuters) - Most companies believe the time is ripe for deals, but only one third have the strength and agility to snap up "once-in-a-lifetime" acquisition opportunities in the wake of the credit crisis, according to a global survey.

Ernst & Young, which quizzed 490 top executives from "major industry players" across 32 countries, said 33 percent were likely or highly likely to buy firms in the next 12 months, with 25 percent expecting to bid in the next six months. There were no data on the size of possible targets.

Rainmakers are seizing on North American food giant Kraft Foods Inc's (KFT.N) $16 billion hostile bid for UK rival Cadbury Plc (CBRY.L) and billionaire investor Warren Buffett's $26 billion purchase of Burlington Northern Santa Fe Corp (BNI.N) this month as a signal the deal drought is ending.

But Ernst & Young said capital scarcity and the fallout of $10.8 trillion government bailout and stimulus plans, after the near collapse of the banking industry last year, was hampering the aspirations of about 40 percent of executives.

This leaves the field open to those with the resources to execute deals -- and implies there could be muted competition for assets at a time when industries, such as banks, are forced by regulators to axe balance sheets as payback for state bailouts.

"To thrive, companies need to be resilient and they also need to adapt quickly," said Pip McCrostie, global vice-chair at E&Y's transaction advisory services business, noting those best placed to exploit acquisition opportunities would emerge as winners from the credit crisis.

"That means being able to compete strongly for new funding options in a time of scarce capital, strengthening their core operations and having the ability to make opportunistic decisions."

As the credit squeeze forces sellers to either divest non-core assets or sell core activities to bolster weak balance sheets, McCrostie said some investors and boards were proving risk adverse and preferred to hoard cash.

She noted that some executives "think they won't get blamed for doing nothing".

But she told Reuters: "Those that are more assertive, agile and flexible are going to secure a great competitive edge. There are assets becoming available that you might otherwise not have seen in your career as CEO or CFO or corporate development officer ... Your top people are going to come to the surface."

Almost two-thirds of acquisitive companies said they were seeking deals to strengthen core operations and half were hoping to break into new markets, according to the survey.

The United States tops the list for the developed world and India and China remain the most attractive destinations for emerging market deals -- and around one third of executives asked said they would be able to react at very short notice as distressed assets come to market.

(Reporting by Kirstin Ridley; Editing by David Cowell)

Source: http://www.reuters.com