Acquisitions high on corporate agenda

An increasing number of Australian companies are seeking to make acquisitions in the next six months, Ernst & Young's latest bi-annual Capital Confidence Barometer shows.

The findings are based on a March/April survey of more than 800 executives around the world, including nearly 10% from Australia and New Zealand and shows 45 per cent of Australasian respondents intend to transact in the next six months, up from 29 per cent six months ago.

Graeme Browning, Ernst & Young oceania leader for transaction advisory services, says the report findings are consistent with what we are seeing in the market today.

"Our transaction teams are busy and there is a lot of work in the system. Corporates are divesting non-core divisions and others are looking for the growth and synergies that bolt-on acquisitions bring," Mr Browning said.

"We are starting to do a lot more work around IPOs, and private equity are cashed up and keen to get back in the game."

"I think over the course of the next couple of months we will see quite a lot happening. Once it begins, it will snowball. It is definitely building - you can feel a momentum that is very real."

"Buyers are wanting to do more to understand acquisition synergies, as well as the risks. Planning for the post-deal integration is happening up-front, it's a very robust process."

Mr Browning said the majority of companies are now looking to invest, following 12-18 months of preserving and raising capital.

Other key Australasian figures in the Capital Confidence Barometer include:

92 per cent of Australian companies are optimistic about the strength of market opportunities at home.

80 per cent view the future of their business as robust, with many reporting confidence in the effectiveness of their capital structures and an easing of liquidity restraints.

42 per cent indicate their business has no difficulty obtaining access to finance, with the remaining 58 per cent believing access to finance will open up within the next six months.

50 per cent have seen an improvement in market liquidity in the last six months with the remaining 50 per cent seeing no change.

63 per cent of Australian companies say cash remains the single largest source of funding for transactions.

The top three allocations for capital are organic growth, inorganic growth and research & development.

"Confidence is there around corporate earnings, with momentum building in the US and strong across Asia. While the sovereign debt issues in Europe are a concern, at the moment it is not impacting underlying global economic recovery and hence transaction demand will increase," Mr Browning said.

"The data out of the US is improving and Asia is strong, and this is where the investment capital is going to and coming from."