Actively managing the present and anticipating the future defines new M&A strategies.
Argentina Capital Confidence Barometer | November 2017 | 17th edition
EY’s Global Capital Confidence Barometer is a regular survey of senior executives from large companies around the world, conducted by Euromoney Institutional Investor Thought Leadership.
The respondent community comprises an independent panel of senior executives and select EY clients and contacts.
Our 17th Barometer provides a snapshot of our findings, gauges corporate confidence in the economic outlook, and identifies boardroom trends and practices in the way companies manage their Capital Agenda.
A note from Ignacio Hecquet, Partner, Transaction Advisory Services, Argentina
Improving confidence in the local economy boosts M&A activity as well as organic growth opportunities
Based on the latest Capital Confidence Barometer, Argentine companies are feeling
optimistic about the shape their domestic economy is taking. Supporting this positive
sentiment, we’re seeing an increasing appetite for M&A and increasing efforts to improve
companies’ existing operations.
Recent Argentine midterm elections delivered victories for President Macri in key districts,
helping to strengthen his hand in executing economic plans he deems necessary to improve
the country’s economy and competitiveness. Our Barometer respondents appear to welcome
the direction of this economic revival plan, as nearly two-thirds (63%) of Argentine executives
see the local economy improving — a 20-percentage-point increase from a year ago.
This confidence is supported by strong economic fundamentals across the board. Executives
report an improved outlook for corporate earnings and short-term market stability — sentiment
around these factors is up by more than one-third from our last Barometer, in April.
This rising confidence in Argentina’s outlook is generating momentum for M&A: 70% say they
expect to pursue deals in the next 12 months. Healthy deal pipelines, coupled with the return
of private equity as a major player in the M&A market, are expected to propel dealmaking
further. Almost two-thirds (63%) of Argentine executives anticipate the M&A market improving
over the course of the coming year.
Even as Argentine companies actively pursue M&A as part of their broader growth strategy,
the strong local economy will also provide a boost to organic growth. In the coming year, 70%
of Argentine executives indicate that they are focused on existing operations and products.
At the boardroom level, digital disruption dominates the conversation. Asked about the
primary disruptive forces affecting their sectors, a combined 60% of Argentinian executives
cite the impact of digital technology on their business models and threats from digitally
Given these pressures, more than three-quarters of Argentine respondents say they are taking
a proactive approach to addressing the impact of digital disruption on their business models.
And half say they are proactively responding to threats from digitally enabled competitors
and start-ups. Among the range of options to address these issues, a majority of Argentine
executives are both acquiring digital capabilities and entering into joint ventures (JVs) to drive
their digital transformation.
As Argentine companies look ahead and consider multiple future scenarios, a majority are
seeking to future-proof their businesses through corporate venture capital (CVC) investments;
in fact, 62% are committing up to 10% of their planned acquisition capital toward CVC
investments. A plurality of respondents say the primary driver for this CVC activity is to gain
access to new capabilities and technologies.
In all cases — in Argentina, as in the rest of the world — the goal of corporate leaders is to stay
one step ahead of the disruption that offers a wealth of both opportunity and risks.