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By Nick Lord
The latest findings of Ernst & Young's Capital Confidence Barometer shows that corporate executives around the world are considerably more optimistic than they were a year ago, or at least were before the latest jitters hit the financial markets.
The findings come from the quarterly survey carried out in March of 810 executives from companies in 51 countries.
The key findings of the report - released this week - show that:
- Forty percent believe the downturn will end in the next 12 months, down from 70 percent who believed it would extend for at least 1 to 2 years.
- Sixty-one percent of respondents expect the downturn to end in their industries within 12 months, compared to 49 percent previously.
- Forty-seven percent now expect to make an acquisition in the next six months - an increase of 22 percentage points.
This last point is potentially most interesting, as it shows that corporate executives' animal instincts are coming back. This is partly due to the re-opening of the capital markets: Twenty six percent of the respondents said that they felt less restricted in their access to the capital markets this quarter than they did a year ago.
It also reflects a less intense focus on balance sheet preservation. In the commentary accompanying the survey, Ernst & Young notes that more companies are willing and able to acquire, with many looking to make previously deferred investments. There is also a greater focus on growth rather than paying down debt or paying shareholder dividends, the firm says.
Not that executives are suddenly throwing caution to the wind. As E&Y also observes, "We see demands for more clarity around future earnings of potential targets than ever before."
Too, capital structure remains a critical issue. Fifty eight percent of the respondents said that they would need to refinance loans or other debt obligations at some point in the next four years and so this will remain a key consideration even as inorganic growth options return to the agenda.
Another caveat: This survey was conducted prior to the last month's market meltdown. It is likely that confidence would have taken a battering even if the markets themselves remain somewhat open. The fragility of the first quarter rebound will be revealed in the next issue of the survey, due out in late July.
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