EY Global Capital Confidence Barometer (12th Edition)

Capital
Confidence
Barometer
Global
Innovation, complexity
and disruption define the
new M&A market
April 2015 | ey.com/ccb | 12th edition

Capital Confidence Barometer
Key M&A findings
56% of companies expect to pursue
acquisitions in the next 12 months
See page 8
73% of M&A activity will be innovative
investment
See page 13
50% increase in intent to pursue upper-
middle-market deals
See page 13
45% are proactively guarding against
cyber breaches in their M&A process
See page 12
47% of companies intend to complete
more deals than in the prior year
See page 10

1Capital Confidence Barometer |
Innovation, complexity and disruption
define the new M&A market
Pip McCrostie
Global Vice Chair
Transaction Advisory Services
Our 12th Global Capital Confidence Barometer finds the global M&A market maintaining
the positive momentum that developed during 2014. For the first time in five years,
more than half our respondents are planning acquisitions in the next 12 months, as deal
pipelines continue to expand.
Executives express increasing optimism in the global economy, with much broader consistency
across geographies than in 2014. This economic optimism, combined with steady confidence
in corporate earnings and other leading market indicators, is fostering an environment where
companies are preparing bolder moves, including M&A, to generate future value.
Our survey reveals three key reasons for the sharp increase in dealmaking intentions.
First is the arrival of new entrants — both start-ups and companies returning to the market
after staying on the sidelines for several years. Second, divergent economic conditions are
accelerating cross-border M&A, as existing momentum in many developed markets is further
fueled by falling oil prices and currency fluctuation. And third, disruptive innovation is driving
dealmaking at every level of the enterprise.
Of course, challenges remain prominent on the boardroom agenda. Greater volatility in
commodity and currency markets, geographic divergence in economic conditions and
monetary policies, and lingering geopolitical concerns all present complexity. As well,
rapid technological change is creating new risks such as cybersecurity, which has emerged
as a core business issue that must be managed as part of the dealmaking process.
Notwithstanding these risks, the overall view in
this Barometer is of a global M&A market on
an upswing after years of crisis. Companies
are learning to create opportunity and
drive growth amid a more competitive
economicand geopolitical landscape.
After a half-decade of stagnation, we are
seeing the bold beginnings of a new kind of
M&A market — one marked by innovation,
complexity and disruptive change.

Macroeconomic
environment
An overwhelmingly positive outlook for the global economy, and a
continued robust outlook for corporate earnings and other leading market
indicators, including credit availability, should combine to support a
healthy M&A environment over the next 12 months.
2 | Capital Confidence Barometer
83%of executives view the global
economy as improving

Macroeconomic environment
Executives see sustained momentum in
broader global economy
The vast majority of executives now see the global economy as
improving, up strongly from a year ago. Our survey shows broad-
based confidence across all geographies. In 2014, only the US,
UK and China were fueling economic optimism. In 2015, multiple
engines are powering the global economy: a US economy moving
from perceivable to unequivocal growth, China moderating but
still growing, and a Eurozone economy moving past austerity in its
stronger economies and managing risk elsewhere. While significant
downside risks remain, executives are increasingly focused on
capturing the potential upsides of global economic growth.
Corporate earnings outlook and other leading
market indicators remain positive
Our survey reflects some reduction in confidence in corporate
earnings growth from last year but it still remains high. This
sentiment may reflect a corporate environment entering a new
phase. Many companies are experiencing diminishing returns
from shorter-term cost-cutting and efficiency programs instigated
at the outset of the global financial crisis. These companies may
experience a lag in the realization of cost savings from longer-
term structural transformation programs currently underway. So
a short-term tempering of earnings growth is to be expected. In
addition, the credit landscape is complicated but favorable overall.
While US quantitative easing (QE) ends, the introduction of QE
in Europe and its continuation in Japan should support a healthy
availability of credit worldwide.
What is your perspective on the state of the
global economy today?Q:
Please indicate your level of confidence in
the following at the global level.Q:
Apr 15Oct 14Apr 14
Equity valuations/
stock market outlook
Short-term
market stability
Credit
availability
Corporate
earnings
51%54%
49%
69%
64%
54%
72%
58%
54%
72%
77%
65%
Battle for talent heats up as companies look
to recruit and retain
A new phase of the global employment picture appears to be at
hand. Companies are not only growing their workforce but are
also under pressure to retain the best talent. Nearly two-thirds of
executives say they are maintaining their workforce size. Meanwhile,
the number expecting to grow their workforce is down from six
months earlier but remains nearly parallel with a year ago. The
percentage of respondents anticipating workforce reduction is
the lowest since the first Barometer in 2009. Strong US and UK
employment growth and an improving Eurozone situation are
compelling companies to keep one eye on acquiring talent as they
simultaneously defend their workforce from competitive poaching.
With regard to employment, which of the following does
your organization expect to do in the next 12 months?Q:
Create jobs/
hire talent
Keep current
workforce size
Reduce workforce
numbers
Apr 15
29% 65% 6%
Oct 14
52% 41% 7%
Apr 14
31% 52% 17%
Geopolitical concerns persist, commodity and
currency volatility rises
Unsurprisingly, when companies consider the major risks to
their business, the largest number view the ongoing geopolitical
issues — from Eastern Europe to the Middle East — as the greatest
concern. What is perhaps surprising, and might have been
unforeseen as recently as six months ago, is how the sharp fall
in commodity prices and increasing volatility in currencies have
grown as major concerns. These issues rank a strong second
place to geopolitics among business risks. Going forward,
divergent monetary policies may increase currency volatility,
which, together with geopolitical concerns, hinders the ability of
executives to plan ahead.
What do you believe to be the greatest economic
risk to your business over the next 6—12 months?Q:
0 5 10 15 20 25 30 35 40
37%
35%
10%
9%
7%
2%
Increased global and regional
political instability
Increased volatility in
commodities and currencies
Regulatory environment
Economic situation
in the Eurozone
Slowing growth in key
emerging markets
Deﬂation
83%
Apr 15
3%
14%
53%
Oct 14
3%
44%
60%
Apr 14
9%
31%
ImprovingStableDeclining

Cost reduction continues as a perennial focus, but in a fast-
changing world, companies are pursuing innovative growth
strategies to improve their market positioning.
Corporate
strategy
of companies are focused
on innovative organic
growth strategies
76%

Corporate strategy
Which statement best describes your organization’s
focus over the next 12 months?Q:Intense cost scrutiny now an everyday feature
of corporate strategy
Cost discipline is now embedded in corporate DNA — even as the
global economy moves past crisis mode. A low-growth, low-
inflation environment compels executives to keep a tight rein on
cost structure, as increased expenses cannot easily be passed on
to customers. This cost focus is exacerbated in the short term by
greater currency volatility and fluctuations in commodity pricing.
What is the primary focus of your company’s organic
growth over the next 12 months?Q:Innovative organic strategies targeted to
boost market footprint
Given the overwhelming view that the global economy is
expected to improve — coupled with the disruptive forces
affecting all industries — executives are now more likely to pursue
innovative growth strategies. These strategies include entering
new markets, considering new services, increasing RD and
exploiting technological change.
To be sure, focus on core operations remains a priority. However,
the definition of “core” continues to evolve, as technological
change and disruptive competitors continue to redefine the
essence of a company’s business. Companies must protect and
grow this ever-evolving core while accessing new opportunities,
as they seek to expand their market footprint and protect their
competitive position.
Growth Cost reduction and
operational efﬁciency
Maintain stability Survival
52% 31% 15% 2%
Apr 13
40% 37% 17% 6%
Apr 14
31% 54% 14% 1%
Apr 15
Apr 13 Apr 15Apr 14
New sales
channels
More rigorous focus
on core products/
existing markets
Increasing RD/
product introductions
Investing in new
geographies/markets
Changing mix of existing
products and services
Exploiting technology to
develop new markets/products
6%
20%
17%
12%
11%
19%
30%
24%
19%
14%
14%
12%
17%
21%
16%
15%
9%
24%
Conventional
Innovative
The definition of “core”
operations continues to
evolve. Technological
change and disruptive
competitors are
redefining the essence
of a company’s business.

Globalmegatrends Which of the following will impact your core business and your acquisition
strategy most in the next 12 months?Q:
Fundamental global changes reshaping
corporate strategies
Global marketplace — Economic power shifts east
and south, driving patterns of trade and investment
Faster growth rates and favorable demographics in key emerging markets are expected to feature prominently
over the next decade, as the gulf between developed and emerging countries continues to shrink and a new
tier of emerging nations is driven by its own nascent middle classes. Increasingly, innovation is taking place in
emerging markets, with Asia as a major hub. At the same time, the battle for talent will be increasingly fierce,
driving greater workforce diversity to secure competitive advantage.
The world’s economies are expected to remain highly interdependent — via trade, investment and financial
systems — driving the need for stronger policy coordination among nations and resilient supply chains for
companies operating in this environment. At the same time, domestic interests will continue to compete with
the forces of global integration. These trends will affect companies’ core business and acquisition strategies
regardless of location, but executives nonetheless must consider not only what they do, but where they operate.
Core business
31% 40% Acquisition strategy
Entrepreneurship rising — Growth in global entrepreneur
class will require more supportive ecosystems
Entrepreneurs are the lifeblood of economic growth worldwide, both as employers and as producers of
innovative products and services. They drive upstream and downstream value-chain activities. The growth and
prosperity of all economies — developed and emerging — rely on robust entrepreneurial activity.
While some entrepreneurial activity is still motivated by necessity, “high-impact” entrepreneurship, once
largely confined to mature markets, now drives emerging market expansion. Indeed, many emerging-market
entrepreneurs are building scalable enterprises that capitalize on local needs and serve as business role models.
The rise of this entrepreneurial spirit is accelerating the introduction of new entrants to sectors that rely on
intellectual property, such as consumer products, life sciences and technology. This means both challenges for
existing players and opportunities as innovative start-ups attract MA activity.
Core business
Digital future — Technology is disrupting all areas of
enterprise, driving opportunities and challenges
Fueled by the convergence of social, mobile, cloud and big data, and the growing demand for anytime, anywhere
access, technology is disrupting all areas of the enterprise — across industries and geographies.
The evolution of the digital enterprise also presents significant challenges: new competition, changing customer
engagement and business models, unprecedented transparency, privacy concerns and cybersecurity threats.
Companies that seize the opportunities offered by digital advances stand to gain; those that cannot may lose
everything. Relationships between companies are becoming more fluid, as partners in one channel become
competitors in another.
In sum, all of these technology-driven changes make long-term corporate strategy and acquisition plans far more
complex and yet require expedient decision-making.
Core business

7Capital Confidence Barometer | 7
Boardroomagenda
Preserving: How can we
improve the performance
of our assets?
As companies are out of survival mode,
executives are no longer focused on
preserving capital and are now turning to
other Capital Agenda areas.
Optimizing: Which steps
can we take to maximize
our portfolio’s performance?
This is the leading Capital Agenda focus — 58%
of executives are planning to optimize capital
and are retaining rigor and discipline
in their operations.
Investing: What is the best way for
our company to grow — and is it
aligned to our core business?
Companies are currently more focused on
rigorous cost management and operational
efficiencies — only 12% of companies
are devoting their primary attention
and resources to investing.
Raising: Do we have the right
capital structure to meet our
strategic priorities?
With healthy balance sheets,
companies are well positioned to fund
deals — 30% of executives expect
to focus on raising capital.
Operational efficiencies top boardrooms’
agendas
While costs and efficiencies are always a primary boardroom topic, the recent fluctuations of currencies
and commodities have further elevated the prominence of cost reduction in the short term. Cost reduction
is also at the heart of the shareholder activist agenda. In this Barometer, activist influence has not been
elevated relative to other issues, because it was already at a very high level. Acquisitions are a continued
focus of the boardroom agenda, as companies keep their eye on value-creating transactions.
Comparing responses on the boardroom agenda (above) with our survey results (below) on the Capital
Agenda — EY’s framework for companies’ strategic decisions — we see a strong correlation. Optimization is
the overwhelming capital priority, topping the agenda for well over half of executives. This reinforces that
even as the global economic outlook improves, companies see a rigorously efficient portfolio as essential to
remain competitive and protect corporate positions.
Reducing costs/
improving margins
40%
Acquisition
18%
Returning cash
to shareholders
6%
Shareholder
activism
3%
Strategic
divestment
(spin-off/IPO)
2%
Changing commodity
prices
31%
Which of the following has been elevated on your boardroom agenda?Q:
Capital Confidence Barometer |

MA
outlook
The evolution of the MA market in 2014 — from an emphasis on
megadeals to late-breaking growth in the middle market — boosted
the deal market to new, post-crisis highs. The market in 2015 has
so far continued this trend, with companies continuing to transact,
including start-ups and companies previously on the sidelines
entering the fray.
of companies expect to
pursue acquisitions in
the next 12 months
56%

What is your expectation for the MA market in the
next 12 months?Q:
Do you expect your company to actively pursue
acquisitions in the next 12 months?Q:
Has your MA strategy changed as a result of the
increased deal activity in 2014?Q:After 2014 gains, MA intentions step up as
market growth stabilizes
Last year witnessed the strongest increase in mergers and
acquisitions since the global financial crisis. Growing confidence
in the global economy will further support MA in 2015. More
than three-quarters of executives plan to boost their dealmaking
in some fashion over the next 12 months. Moreover, while nearly
one-third of executives are planning bigger deals, bolt-on and
complementary deal intentions are also up.
With the market already at elevated levels, it is not surprising
that a greater percentage of our respondents expect MA activity
to remain stable over the next 12 months — this response is
now even with those expecting market improvement. Given the
strength of deal intentions, greater stability should provide the
foundation for sustainable growth in the MA markets.
More than half of companies intend to
acquire
For the first time since 2010, more than half of our
respondents intend to make an acquisition in the next 12
months. With economic sentiment broadly supporting
MA, our survey reveals a number of reasons for this sharp
increase in dealmaking intentions.
New entrants — both start-ups and companies returning to
the market — are boosting deal volumes. Also, cross-border
MA has been accelerated by divergent global economic
conditions. For example, QE will likely boost evaluation of
companies in the Eurozone, even as a decline in the value
of the euro and falling oil prices are making Eurozone-
based assets far more attractive. In addition, disruptive
innovation — such as increasing convergence and blurring
of defined sector lines — is driving dealmaking at every level
of the enterprise. Supply chains, channels to market and
back-office infrastructure are all affected by innovation,
and MA is often the best route for maintaining or gaining
competitive advantage.
Two other ingredients necessary for positive MA sentiment
are the improving quality and quantity of potential targets.
The quantity or inventory of assets on the market is
strong, supported by private equity finally divesting long-
held assets and increased corporate carve-out activity.
The quality of targets is also relatively strong, driven by
an improving business environment and ongoing cost-
management and margin-improvement programs.
Apr 14 Apr 15Apr 13
Stable
Declining
Improving
49%
36%
23%
6%
2%
4%
73%
58%
49%
Oct 14 Apr 15Apr 14
Quality
of acquisition
opportunities
Number
of acquisition
opportunities
Likelihood
of closing
acquisitions
46%
51%
41%
58%
69%
51%
32%
44%
37%
Apr 13 Oct 13 Apr 14 Oct 14 Apr 15
29%
35%
40%
56%
31%
Oct 14 Apr 15Apr 14
Quality
of acquisition
opportunities
Number
of acquisition
opportunities
Likelihood
of closing
acquisitions
46%
51%
41%
58%
69%
51%
32%
44%
37%
Apr 13 Oct 13 Apr 14 Oct 14 Apr 15
29%
35%
40%
56%
31%
22% 31%
21%
26%
Yes, we are planning
relatively larger deals
Yes, we are planning deals in
different sub-segments of the industry
Yes, we are considering more
mid-size/bolt-on deals
No, we are maintaining our
current transaction strategy
MA outlookMA outlook

New market entrants accelerate pipeline growth
Companies expect to complete more
acquisitions
Almost half of executives expect to close more deals in the next
12 months than they did in the prior year. Most also say that
their total number of deals will be relatively small, one or two
acquisitions. Many of these dealmakers are likely new entrants
or those returning after a break, based on analysis of forward-
looking expectations and historic deal completions. These
companies will help drive 2015’s increased deal activity, just as
they did in 2014.
MA pipelines remain healthy as the pool of
dealmakers expands
Deal pipelines are a key indicator of the state of the MA
market, offering context on how companies are thinking
about opportunities and preparing for growth. In total, our
respondents are considering some 2,695 deals — a notable 19%
increase over the prior 12 months, signaling the fundamental
health of the deal markets.
Growth in larger pipelines is poised
to resume
Companies with the largest pipelines today are the ones
with the strongest intention to increase pipeline size in the
next 12 months. As companies lean toward more innovative
deals that shift the scope of their operations into adjacent
or complementary businesses, they will naturally consider a
greater number of potential targets.
Correlation analysis between current pipeline and
expected change
=5
4
3
2
1
Number of deals
Expected growth in the next 12 months
IncreaseNo changeDecrease
33% 57%10%
20% 52%28%
16% 13%71%
35% 63%2%
36% 61%3%
How do you expect your deal pipeline to change over
the next 12 months?Q:
0 20 40 60 80 100
Apr 15Apr 14
2,273
2,695
Number of deals
MA outlook
Q:
How many acquisitions do you expect to complete in
the next 12 months?
=5
4
3
2
1
Number of acquisitions
10%
36%
43%
4%
7%
Is this more or less than the number of acquisitions you
completed in the prior 12 months?Q:
How many deals do you currently have in your pipeline?
Q:
3%
47%
50%
More
Stay the same
Less
As companies lean toward
innovative deals that shift
their scope into adjacent
or complementary
businesses, they naturally
consider a greater
number of targets.

MA outlook
Valuations support continued dealmaking
How do you expect the valuation gap between buyers
and sellers to change in the next 12 months?Q:
What do you expect the price/valuation of assets to do
over the next 12 months?Q:
How do you think that buyers’ expectations currently
compare to sellers’ (valuation gap)?Q:Potential upside pressures on asset prices,
but MA market expected to persevere
Record-high equity markets, strengthening MA markets and
an improving global economy have all increased competition
for assets. Given this environment, it is unsurprising that most
executives see the valuation gap widening. However, a clear
majority see that gap as only somewhat higher — a sign that the
deal markets are healthy but not overheated. Most important,
overwhelming majorities expect both the valuation gap and the
price of assets to remain stable in the next 12 months, creating
conditions conducive to dealmaking.
One region where valuations will likely increase is the Eurozone,
due to its new quantitative easing program. However, while
some upward pressure on valuations is expected there, other
factors, such as exchange rates and lower oil prices, should
mitigate any significant negative effect on MA.
The gap is small (10%)
Somewhat higher (10%–25% gap)
Signiﬁcantly higher (25% or more)
No gap
53%
6%
2%
39%
Widen
Stay the same
Contract
78%
4%
18%
Decrease
Remain at current levels
Increase
78%
5%
17%
Overwhelming majorities
expect both the valuation
gap and the price of
assets to remain stable
in the next 12 months,
creating conditions
conducive for dealmaking.
MA outlook

Cybersecurity
Cyber attacks a growing risk to
rebounding MA market
Transactions are a prime target for cyber attacks. The MA market rebound, coupled with heavy
reliance on technology and digital assets in today’s transaction environment, is a recipe for
increased cyber attack risk. More than ever, a strong process for mitigating cyber threats is
imperative for all companies. Cyber attacks are a fundamental business risk, not simply a concern
for the IT department.
Implications of a cyber attack
Potential business risks of a cyber attack include theft of RD and intellectual property, financial
fraud and reputational damage. The disruption caused by an attack may extend beyond the company
itself to the industry and the broader market.
In the case of MA specifically, companies’ systems can be hacked or compromised during the deal
process, with the intent to gain insider information. One obvious risk is manipulation of the stock
price and the deal process. A less obvious but equally significant risk is the potential to gain strategic
information that could be used to disrupt the company’s core business and competitive position.
Identifying the risk is the key step in managing it
The MA process centralizes an organization’s strategy and information on all of its functions in one
repository. This presents a unique cyber risk situation that must be managed.
One of the most important ways to manage cyber risk during the MA process is to proactively
determine who may be targeting the organization — and which information they might want to steal.
While identifying these threats, companies should consider not only potential attackers from outside
the organization but also entities with authorized access, such as supply- and distribution-chain
vendors as well as other business partners. Even the target company in an MA transaction could
pose a threat, because any weakness in its security program could be exploited. Once these risks are
identified, preventive steps can be taken to alleviate them.
We are increasing our measures taken to protect against potential
cybersecurity breaches of our MA process.
We are more concerned about the cybersecurity of planned
acquisitions or targets than we were 12 months ago.
We are more concerned about the business impact of potential
cybersecurity breaches than we were 12 months ago.
In the past 12 months, we have decided not to pursue a planned
acquisition due to cybersecurity issues.
41%
12%
2%
45%
Which of the following statements do you most agree with?Q:

MA outlook
Dealmakers pointed toward innovation
How much capital do you plan to allocate to acquisitions
in the next 12 months?Q:
What is your largest planned deal size in the next
12 months?Q:
Your planned MA activity will mostly be:
Q:Disruptive forces driving deals
Innovation, disruptive forces, blurring of their own clear sector
definitions and global megatrends are all combining to fuel
MA. In response, companies are making bolder moves to shift
their business scope and maintain competitive advantage.
Accordingly, nearly three-quarters of executives who are
considering deals are eyeing these innovative investments
rather than bolt-on or transformative transactions. More and
more, companies are learning to anticipate future challenges
to their business models and using acquisitions as a vehicle to
accelerate their response.
Upper-middle-market MA to accelerate
Looking at expected deal size, the smaller middle-market
deals — those under US$250m in size — continue to dominate
executives’ plans. Contributing to the continued strength in
this category is a large number of smaller, more innovative
acquirers entering the market. However, since our last
Barometer, the most significant growth has been in
upper-middle-market deals, those above US$250m and
under US$1b in size. This category has increased by 50%.
While blockbuster megadeals — the dominant category in 2013
and early 2014 — have not exited the market entirely, our
respondents confirm that deals over US$1b in size are now only
a small focus of their activity.
73%6%
21%
Innovative investment (shifts scope of
your business — could be into another
industry sector)
Bolt-on (complements current
business model)
Transformative (high-value acquisition
which signiﬁcantly changes the size and
scale of your company)
20%
77% US$251m—US$1b
US$0—US$250m
Greater than US$1b
3%
21%
77% US$251m—US$1b
US$0—US$250m
Greater than US$1b
2%
Deals under US$250m
continue to dominate
executives’ plans. But
the most significant
growth since our last
Barometer has been
in upper-middle-market
deals — those between
US$250m and US$1b.
MA outlook

Sectoroutlook
Many established companies are making
deals involving “moonshots” — technologies
that may drive dramatic change and
commensurate returns, such as the
Internet of Things and virtual reality.

Search for intellectual property and strong brands driving top industry sectors, which are
transacting vigorously
Percentage reflects those who intend to actively pursue acquisitions in the next 12 months.
Strong deal sentiment across many sectors
Automotive
Renewed optimism in the automotive sector — brought about by
increasing sales in both developed and emerging markets and a
sector-wide drive to decrease costs and improve efficiencies — is
motivating increased MA. A significant number of deals focus
on acquiring emergent technologies, such as driverless cars and
advanced materials.
59%
Technology
Increasing competition for assets related to smart mobility, cloud
computing, social networking, big data analytics and accelerated
adaptation are powering tech MA. Furthermore, some established
companies are making deals involving “moonshots” — technologies
that may drive dramatic change and commensurate returns, such as
the Internet of Things and augmented or virtual reality.
67%
Consumer products and retail
Consumer products companies have sharpened their focus on
developed-market businesses. In the absence of ample growth
avenues, companies are targeting operational efficiency by making
strategic divestments. Portfolio optimization is emerging as a critical
theme, driving strategic transactions amid increasing investor
pressure on companies to deliver shareholder value. Large consumer
product players are optimizing their brand portfolios and market
exposure by disposing of non-core and lower-growth businesses and
rechanneling investments into acquiring or expanding in faster-
growth or higher-margin businesses.
58%
Diversified industrials
As growth in industrials is typically tied to GDP, MA is necessary to
achieve above-market returns. In particular, the decline in the euro
will likely boost the attractiveness of high-quality, IP-rich Northern
European assets, especially Mittelstand companies in Germany,
Switzerland and Austria, with demand coming from the US, China
and Japan.
Given the low-growth environment, portfolio management will
continue to be a large focus, especially for those affected by recent
volatility in energy prices. Cost reduction remains an imperative for
these companies, because of pressure on topline growth.
53%
MA outlook
Financial services
Compressed interest-rate margins and regulatory capital pressure in
the banking and capital markets sector may result in further industry
consolidation and asset sales. We also expect to see continued
interest in the specialty-finance and fintech segments.
Insurance companies are looking to enhance the overall structure
of their operations and balance sheets in anticipation of Solvency II.
Meanwhile, reinsurers are looking to grow and enhance investor value.
The current environment makes acquisitions an attractive option.
International presence has become an increasingly important
priority for wealth and asset managers. With global markets in
different economic cycles, investors expect asset managers to access
investment returns wherever the opportunity exists.
49%

Dealmakers looking across borders, but relatively
close to home
Executives report rather low expectations for their own
domestic MA. At just 16% of planned deals, this response is
well below the historic average. More than four-fifths of our
respondents are seeking deals outside of their home country.
A major driver of this search for cross-border opportunities
is companies exploiting divergent economic performance
between countries and regions. Where a company operates
is now as important as the segments or sectors in which
it operates. Enterprises that undertake a robust portfolio
review often move toward geographies that fill gaps or are
ripe for disruption.
The largest category of executives — more than
half — are focusing their MA strategies on cross-border
transactions in their immediate region, driven by the ease of
acquiring in common economic trading areas. This intention
to acquire close to home is also boosted by the familiarity
of investing in adjacent countries, which eases the path to
cross-border MA. However, a very sizable minority — almost
one-third — are planning to acquire further afield, which
highlights the increasing interconnectedness within the
global economy.
Where is the main focus of your MA strategy over the
next year?
Q:
Which are the top destinations your company is most likely to invest in the next 12 months?Q:
54%
16%
30%
Immediate region
(countries close to home)
Outside domestic market/
immediate region
Domestic market
(home country)
Western Europe to lead cross-border deal flow and Asia-Pacific to remain attractive
North
America
Latin
America
Western
Europe
Africa
Middle East
Eastern
Europe
Asia-Pacific
Primary
preferred
destination*
Immediate
region market
Outside
domestic market
Domestic market
*Respondents were polled on their top five investment destinations; this chart reflects the top preference for each region.
MA outlook

Companies are planning to invest the majority of their acquisition capital in developed markets, which will provide more near-term growth.
Emerging markets remain important for the long term, but inbound acquisition activity into these markets will likely remain unchanged for
the next 12 months. The potential upturn in major developed markets, particularly the Eurozone, is also affecting MA strategy.
Acquisition capital targeted primarily to developed
and top-tier emerging markets
0 10 20 30 40 50 60 70 80
3%
1%
31%
61%
4%
Above 50%
25%—50%
10%—25%
Less than 10%
None
The popularity of Western Europe as a destination for
cross-border MA should persist as the European Central
Bank begins its QE program, which aims to inject more
than €1.1t of liquidity into the area. This is already
helping lower the relative value of the euro. We would
expect to see an acceleration of deals involving European
companies, especially from acquirers in China, Japan
and the US.
Our survey also finds companies across the globe with
strong intentions to buy into the Asian growth story,
with particular interest coming from Western Europe.
A corresponding trend is the intention of companies
from the Asia-Pacific region to buy outside of both
their domestic market and immediate region — assets in
Western Europe are a particularly strong focus for Asia-
Pacific companies, led by respondents from South Korea
and China.
What percentage of your acquisition capital are you
going to allocate to emerging markets in the next
12 months?
Q:
1. United Kingdom
2. China
3. United States
4. Germany
5. Australia
6. India
7. France
8. Japan
9. Singapore
10. Netherlands
MA outlook

Top MA markets and their key characteristics
MA outlook
Germany has been the main bright
spot within an otherwise depressed
Eurozone. Recent economic releases
and Purchasing Managers Index
surveys point to an acceleration of
growth, though it is still relatively
low compared with historic averages.
Germany’s high-quality corporate
assets, especially in the industrials,
chemicals and automotive sectors, are
already attractive to foreign acquirers,
and a weakening euro promises to make
these assets relatively less expensive.
The main competition for these assets
is likely to come from China, Japan and
the US. As for MA within Germany,
acquisitions by German companies
have historically been focused on the
domestic market, but we are beginning
to see cross-border acquisitions
strengthening, especially those focused
on the US.
Even amid headlines over its recent
economic slowdown, mainland China
remains a very attractive destination
due to levels of growth that remain very
strong relative to the global economy. The
Chinese Government now targets annual
growth at 7%, down from previous growth
rates that ranged as high as 10%. However,
there is no expectation of a hard landing
or significantly greater deceleration. With
economic rebalancing a stated Chinese
policy, further investment opportunities
should arise for inbound investors. The
central bank has yet again lowered interest
rates to stimulate the economy, providing
a more favorable environment for MA.
The Government has also introduced a
range of measures to encourage outbound
acquisitions by Chinese companies,
particularly targeting companies with
intellectual property assets in the industrial
and technology sectors.
With investor sentiment in India seeing
a significant recovery and stock markets
hitting all-time highs, the country’s deal
market is expected to improve. The new
Indian Government’s pro-business stance
should foster a more benign investment
landscape for inbound investment — the
recently announced annual budget
focuses on increased infrastructure
spending and lower corporate taxes to
boost growth — and the economic outlook
is increasingly promising. The outlook is
further driven by a number of positive
economic developments. Low oil prices
will help shrink the country’s import bill
and narrow its current account deficit.
Easing inflation and looser monetary
policy are expected to encourage consumer
spending and investment. Looking from the
outside, global investor sentiment toward
India is currently very positive, especially
compared with other emerging markets,
which should also help boost growth.
GermanyChina India
1. China
2. Japan
3. US
1. China
2. Australia
3. UK
1. Germany
2. China
3. US
1. Germany
2. UK
3. US
1. India
2. Japan
3. China
1. India
2. UK
3. South Africa
Top investors
Top destinations
Top sectors
AutomotiveMedia and
entertainment
Diversified
industrial
products
AutomotiveTelecommunica-
tions
Financial
services
Financial
services
Consumer
products
and retail
Consumer
products and
retail

MA outlook
The United Kingdom has long been a
favored destination for foreign firms
accessing the wider EU market. With
strong domestic growth in 2014, similar
levels forecast through 2015 and a focus
on reducing red tape, the UK should
be able to maintain its unique status
as a global MA hub. Among leading
UK sectors likely to engage in MA, life
sciences and technology companies are
strong innovators, the financial services
sector is robust and consumer products
companies are globally recognized. All
should be looking to make acquisitions
both domestically and abroad and will
be attractive to foreign acquirers. As
for downside risks, the impending UK
elections and uncertainty regarding
the timing of an expected interest-rate
increase — which may raise the value of the
pound, especially against the euro — may
check the deal markets.
More than 20 years into its “Lost
Decade” economic struggles, Japan
continues to suffer from weak domestic
economic growth combined with
persistently low inflation. However,
recent policy decisions by the Japanese
Government and the Bank of Japan have
reinforced policymakers’ determination
to resolve this issue. The recent
combination of lower oil prices and slow
but steady improvements in consumer
confidence and spending could steer
the Japanese economy toward easing
this cycle. In the deal markets, Japanese
companies have increasingly shifted
toward outbound acquisitions, especially
in the industrials and consumer products
sectors. This has been coupled with a
small increase in inbound acquisitions
into Japan, mainly by private equity
investors but also in combinations
involving US and Japanese companies in
the technology and real estate sectors.
The MA market in the United States
is expected to maintain its upward
momentum and continues to be attractive
to foreign investors. Positive US economic
fundamentals, record stock markets and
a low-interest-rate environment are all
strengthening boardroom confidence.
US companies continue to perform
exceptionally — the majority of the SP
500 beat 2014 earnings and sales
estimates — keeping investor morale up
and driving MA. The dollar’s increasing
value should also make outbound deals
appealing, especially those focused
on the Eurozone, where valuation and
currency differentials are most apparent.
The main potential downside for
dealmakers in the US concerns the timing
of the Federal Reserve’s first anticipated
rate hike following the end of quantitative
easing and the overall pace of the return
to normalized interest rates; however,
recent Fed announcements have helped
allay these concerns.
Japan United
Kingdom
United
States
1. Japan
2. South Korea
3. China
1. China
2. UK
3. Japan
1. UK
2. Australia
3. Japan
1. UK
2. Netherlands
3. Singapore
1. Japan
2. France
3. China
1. China
2. Germany
3. US
Media and
entertainment
Technology TechnologyAutomotive Oil and gasLife
sciences
Diversified
industrial
products
Diversified
industrial
products
Consumer
products
and retail

20 | Capital Confidence Barometer20 | Capital Confidence Barometer
• In February and March, we surveyed
a panel of more than 1,600 executives
in 54 countries; more than 850
were CEOs, CFOs and other
C-level executives.
• Respondents represented 18 sectors,
including financial services, consumer
products and retail, technology,
life sciences, automotive and
transportation, oil and gas, power
and utilities, mining and metals,
diversified industrial products,
construction and real estate.
• Global companies’ annual global
revenues ranged from less than
US$500m (16%); US$500m–
US$999.9m (24%); US$1b–US$2.9b
(26%); US$3b-US$4.9b (15%) and
greater than US$5b (19%).
• Global company ownership was
publicly listed (67%), privately
owned (28%), family-owned (3%) and
government/state-owned (2%).
The Global Capital Confidence Barometer
gauges corporate confidence in the
economic outlook and identifies
boardroom trends and practices in the
way companies manage their Capital
Agendas — EY’s framework for strategically
managing capital.
It is a regular survey of senior executives
from large companies around the world,
conducted by the Economist Intelligence
Unit (EIU). Our panel comprises select
global EY clients and contacts and regular
EIU contributors.
Aboutthissurvey

Contactus
Global
Pip McCrostie
Global Vice Chair
pip.mccrostie@uk.ey.com
+ 44 20 7980 0500
Steve Krouskos
Deputy Global Vice Chair
steve.krouskos@uk.ey.com
+ 44 20 7980 0346
For a conversation about your capital strategy,
please contact us:
Americas
Richard M. Jeanneret
Americas Leader
richard.jeanneret@ey.com
+ 1 212 773 2922
Asia-Pacific
John Hope
Asia-Pacific Leader
john.hope@hk.ey.com
+ 852 2846 9997
Europe, Middle East, India
and Africa (EMEIA)
Andrea Guerzoni
EMEIA Leader
andrea.guerzoni@it.ey.com
+ 39 0280 669 707
Japan
Kenneth G. Smith
Japan Leader
kenneth.smith@jp.ey.com
+ 81 3 4582 6400

EY | Assurance | Tax | Transactions | Advisory
About EY
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About EY’s Transaction Advisory Services
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make better, more informed decisions about strategically
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Whether you’re preserving, optimizing, raising or investing
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unique set of skills, insight and experience to deliver
focused advice. We help you drive competitive
advantage and increased returns through improved
decisions across all aspects of your Capital Agenda.
© 2015 EYGM Limited.
All Rights Reserved.
EYG no. DE0604
ED None
This material has been prepared for general informational
purposes only and is not intended to be relied upon as
accounting, tax, or other professional advice. Please refer
to your advisors for specific advice.
ey.com/ccb

EY Global Capital Confidence Barometer (12th Edition)

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