Two-thirds of UK bosses expect to pursue M&A transactions this year, according to a poll by EY.
The accounting firm's 2022 CEO Outlook Survey found that 66% of chief executive officers (CEOs) expected to transact in the next 12 months, leading a global share of 59%, and representing a nine percentage points rise on last year.
The survey showed the UK remains the second most attractive inbound destination for deals globally behind the US, with its traditional sectoral strengths in financial services, fintech and high-end consumer and industrials helping the country punch above its weight.
According to PitchBook, UK M&A experienced a record year in 2021, rising by 33.5% on 2020 for a total value of £175.2bn across more than 3,700 deals.
Steve Ivermee, UK&I strategy and transactions managing partner at EY, said M&A remained a key part of companies’ strategic growth plans.
“From rationalising their portfolio, to digital transformations and improving their ESG profiles, companies are using deals to reshape their business at pace.
“Given the intense level of deal activity we’ve seen in the last two years, many companies will be integrating recently acquired assets, but UK CEOs are still signalling that they remain strategically poised to buy assets that support their growth ambitions.”
The biggest tension likely to confront bosses in the future will occur between investors and companies on environmental, social and governance (ESG) targets, they said.
While 98% of UK CEOs expected ESG to be an important value driver, 70% had encountered resistance from investors about the way in which this is achieved.
The findings come on the back of squeezed balance sheets, with nearly all the surveyed CEOs reporting an increase in costs during a dynamic period of supply chain disruptions over the last year, with 88% altering those supply chains and accelerating cross-border investment.
Despite rising costs, it appears investment will remain a key theme, with half of CEOs directing investment towards their company’s growth engines in the next five years.
Ivermee said: “The last two years have been a period of intense change. Businesses need to review the profile of their business and its wider ecosystem to position themselves successfully for the future.”