Despite Trade and Tariff Uncertainties, M&A Remains a Top Priority for CEOs Worldwide
In a recent survey conducted by EY, findings revealed that despite the growing uncertainties surrounding trade and tariffs, merger and acquisition (M&A) strategies remain a crucial focus for CEOs globally. The report, which surveyed 1,200 CEOs from various countries, highlighted their evolving perspectives and levels of optimism regarding future business operations and revenue in light of potential tariff impacts.
An alarming 98% of CEOs surveyed, including all 100% of Japanese participants, expressed concern over the implications of tariff increases on their operational capabilities within the next 12 months. Of this group, 50% reported having 'strong' or 'very strong' concerns regarding the effects of increased tariffs. The fluctuations in trade and tariff policies have contributed to mounting market instability, making investment decisions increasingly precarious. However, even in this complex environment, evidence suggests that the rationale for pursuing M&A remains compelling for many leaders.
Further insights from the EY report indicated that 57% of CEOs are willing to pursue M&A within the coming year, although many prefer to wait until market conditions stabilize before making any formal arrangements. Additionally, 55% of CEOs acknowledged deriving substantial value from recent M&A efforts, reinforcing their belief in the continued viability of such strategies. Notably, Japanese CEOs exhibited a cautious approach, yet many are actively exploring diverse growth strategies, including joint ventures and partnerships.
According to Hidetaka Umemura, Leader of EY Japan's Strategy and Transactions, the survey illustrates that all Japanese CEOs are planning some form of strategic transaction, spanning M&A, spin-offs, or IPOs within the next 12 months. Despite the steep decline in interest in M&A, from 69% in previous surveys to only 27% now, the significant challenges presented by current trade situations, often referred to as the 'Trump Tariffs', have led companies to adopt a wait-and-see stance.
Regardless, there remains high investment enthusiasm in domestic consumer-led markets such as India and various Asian countries, with many CEOs pursuing joint ventures and strategic alliances. Moreover, 75% of CEOs view inflation as a persistent issue, indicating steps are being taken to reassess cost structures from a zero-based perspective, focusing on resilient and sustainable business practices.
The survey revealed that geopolitical, macroeconomic, and trade uncertainties are seen as the primary risks hindering growth. Around 42% of respondents indicated that these uncertainties compelled them to delay planned investments. However, the survey also highlighted active efforts for strategic adjustments in global relations. For instance, 44% are contemplating reconstructing supply chains, while 42% are innovating product designs to lessen dependency on materials subject to tariffs. Furthermore, 39% reported relocating operational assets to different regions, signifying a notable shift in strategy.
An intriguing aspect of the study was how trade relationships of great importance are not necessarily between geographically close nations or traditionally significant partners. For example, 42% of Chinese CEOs indicated that the US-China tariff and trade friction remains a top concern, whereas only 8% referenced concerns related to US-Mexico trade dynamics. This further emphasizes the complexity of global interdependencies and the multifaceted challenges posed by tariff issues.
Despite the multitude of factors complicating their decision-making, a significant 57% of CEOs are optimistic about engaging in M&A activity in the near future. Many CEOs are recognizing that technological adoption and talent shortages are driving transformational efforts within their organizations, suggesting they may return to deal-making as market stability gradually returns.
Andrea Guerzoni, EY Parthenon’s Global Vice Chair, pointed out that it is still too early to draw conclusions about how current tariff disruptions will influence M&A activities. He stated, 'CEOs and their management teams are exploring various options available to maintain competitiveness. Historically, executing M&A in the early stages of a crisis has been beneficial for companies looking to create value and strategically position themselves. CEOs who accept the paradox of uncertainty can plan meticulously and act decisively, thereby confidently shaping their corporate futures.'
M&A, even in challenging times, can spur transformation and generate value. Traditional outlooks often cite integration challenges, cultural differences, and overestimated synergies as common deterrents in predicting shareholder value from newly formed mergers. Yet, contrary to these fears, over 55% of CEOs revealed they recently created expected or exceeding value through their acquisitions, with only 2% reporting negative outcomes.
In today's climate, cost reduction has become the utmost priority for many CEOs, leading to a cautious approach toward investments in artificial intelligence (AI). The balance between necessary cost-cutting measures and the push for technological advancement remains a struggle, as 36% of CEOs affirmed gaining positive results from AI initiatives while 25% declared their AI investments fell short.
This creates a dichotomy where leaders must navigate both external instability and internal pressures to enhance operational efficiency and address ongoing inflation concerns. A staggering 71% of CEOs defined inflation as an ongoing challenge they must manage, emphasizing the focus on effective cost management strategies moving forward.
As the business landscape continues to evolve, it is evident from the EY CEO Outlook report that while some obstacles may delay decision-making, the underlying ambition for growth through M&A and other strategic ventures is far from diminished. For full insights and findings, access the complete EY Parthenon CEO Outlook report at EY Global Report.
An alarming 98% of CEOs surveyed, including all 100% of Japanese participants, expressed concern over the implications of tariff increases on their operational capabilities within the next 12 months. Of this group, 50% reported having 'strong' or 'very strong' concerns regarding the effects of increased tariffs. The fluctuations in trade and tariff policies have contributed to mounting market instability, making investment decisions increasingly precarious. However, even in this complex environment, evidence suggests that the rationale for pursuing M&A remains compelling for many leaders.
Further insights from the EY report indicated that 57% of CEOs are willing to pursue M&A within the coming year, although many prefer to wait until market conditions stabilize before making any formal arrangements. Additionally, 55% of CEOs acknowledged deriving substantial value from recent M&A efforts, reinforcing their belief in the continued viability of such strategies. Notably, Japanese CEOs exhibited a cautious approach, yet many are actively exploring diverse growth strategies, including joint ventures and partnerships.
According to Hidetaka Umemura, Leader of EY Japan's Strategy and Transactions, the survey illustrates that all Japanese CEOs are planning some form of strategic transaction, spanning M&A, spin-offs, or IPOs within the next 12 months. Despite the steep decline in interest in M&A, from 69% in previous surveys to only 27% now, the significant challenges presented by current trade situations, often referred to as the 'Trump Tariffs', have led companies to adopt a wait-and-see stance.
Regardless, there remains high investment enthusiasm in domestic consumer-led markets such as India and various Asian countries, with many CEOs pursuing joint ventures and strategic alliances. Moreover, 75% of CEOs view inflation as a persistent issue, indicating steps are being taken to reassess cost structures from a zero-based perspective, focusing on resilient and sustainable business practices.
The survey revealed that geopolitical, macroeconomic, and trade uncertainties are seen as the primary risks hindering growth. Around 42% of respondents indicated that these uncertainties compelled them to delay planned investments. However, the survey also highlighted active efforts for strategic adjustments in global relations. For instance, 44% are contemplating reconstructing supply chains, while 42% are innovating product designs to lessen dependency on materials subject to tariffs. Furthermore, 39% reported relocating operational assets to different regions, signifying a notable shift in strategy.
An intriguing aspect of the study was how trade relationships of great importance are not necessarily between geographically close nations or traditionally significant partners. For example, 42% of Chinese CEOs indicated that the US-China tariff and trade friction remains a top concern, whereas only 8% referenced concerns related to US-Mexico trade dynamics. This further emphasizes the complexity of global interdependencies and the multifaceted challenges posed by tariff issues.
Despite the multitude of factors complicating their decision-making, a significant 57% of CEOs are optimistic about engaging in M&A activity in the near future. Many CEOs are recognizing that technological adoption and talent shortages are driving transformational efforts within their organizations, suggesting they may return to deal-making as market stability gradually returns.
Andrea Guerzoni, EY Parthenon’s Global Vice Chair, pointed out that it is still too early to draw conclusions about how current tariff disruptions will influence M&A activities. He stated, 'CEOs and their management teams are exploring various options available to maintain competitiveness. Historically, executing M&A in the early stages of a crisis has been beneficial for companies looking to create value and strategically position themselves. CEOs who accept the paradox of uncertainty can plan meticulously and act decisively, thereby confidently shaping their corporate futures.'
M&A, even in challenging times, can spur transformation and generate value. Traditional outlooks often cite integration challenges, cultural differences, and overestimated synergies as common deterrents in predicting shareholder value from newly formed mergers. Yet, contrary to these fears, over 55% of CEOs revealed they recently created expected or exceeding value through their acquisitions, with only 2% reporting negative outcomes.
In today's climate, cost reduction has become the utmost priority for many CEOs, leading to a cautious approach toward investments in artificial intelligence (AI). The balance between necessary cost-cutting measures and the push for technological advancement remains a struggle, as 36% of CEOs affirmed gaining positive results from AI initiatives while 25% declared their AI investments fell short.
This creates a dichotomy where leaders must navigate both external instability and internal pressures to enhance operational efficiency and address ongoing inflation concerns. A staggering 71% of CEOs defined inflation as an ongoing challenge they must manage, emphasizing the focus on effective cost management strategies moving forward.
As the business landscape continues to evolve, it is evident from the EY CEO Outlook report that while some obstacles may delay decision-making, the underlying ambition for growth through M&A and other strategic ventures is far from diminished. For full insights and findings, access the complete EY Parthenon CEO Outlook report at EY Global Report.
Topics Business Technology）
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