The Ernst & Young Capital Confidence Barometer – a study of more than 1,000 executives around the world, including 97 from Australasia – shows executives are increasingly optimistic and looking at growth, particularly in Australasia.
Graeme Browning, E&Y's transaction advisory services leader for Oceania, says international interest in Australia is across the board, despite our two-speed economy.
"A lot of the inbound interest sees Australia as a developed country with an attractive growth rate," Browning says.
Browning says while the international interest is across the board, companies with an indirect exposure to the resources industry, such as chemicals businesses, are attracting attention.
And while larger businesses have a better capacity to invest than their smaller peers, Browning says the credit constraints are easing and deals are being made.
But deals are taking a little longer to get through, Browning says, with boards scarred from the experience of the GFC and a price gap between vendors and buyers still evident.
"We did this survey in February and March. If you think back as to what happened then – natural disasters, the unsettled situation in the Middle East and North Africa, sharemarket volatility – nonetheless respondents were optimistic," Browning says.
The survey, conducted by the Economist Intelligence Unit, found Australasian businesses were less likely to acquire than the previous year, but more likely to look to global markets than their peers (at 36% versus the global rate of 26%.)
For SMEs, the M&A conditions are more subdued, with refinancing and debt reduction plans dominating.
But conditions are expected to improve.
"M&A activity is likely to pick up in this space through 2011 and most probably in the form of scrip-based mergers with peers," the survey says.
"This focus on cash reflects an increasing trend from April 2010 and clearly demonstrates that many small businesses are still facing significant issues in the preserving phase of their capital agenda," it says.
"The inability to access debt and equity is forcing respondents to focus internally on how they generate more cash and meet liquidity demands."
Demergers are also tipped to make a comeback, with 20% of Australian respondents tipping a divestment within the next six months.
The trend for joint ventures and alliances is on the up, it added.
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