Will a combination of pragmatic optimism and a “fear of being left behind” in global CEOs drive M&A activity in 2025?

Based on a recent quarterly survey of 1,200 executive leaders* as part of a focus on CEO-level insights and challenges, EY has produced a report to convey respondents’ sentiments around global growth, mergers and acquisitions (M&A), divestments or initial public offerings (IPOs) potential for 2025.

First, 69% of the CEO1 respondents had indicated they were feeling optimistic about the global outlook for next year, amid worries on multiple fronts such as the complexities of an unpredictable and volatile business environment, shaped by emerging technologies; shifting consumer behavior; and an uncertain geopolitical landscape.

Second, 38% of all respondents2 indicated that they considered themselves “ahead of the curve in effectively handling the external forces at play”, with the remainder citing they were struggling to keep pace with the fast-moving external environment and addressing industry disruption.

Other findings

Third, 72% of all respondents had indicated in the survey that they were “proactively assessing their portfolio in line with their core strategy.” EY analysts have read this to indicate “positive CEO confidence combined with a realistic understanding of the risks and rewards stemming from external disruptive forces” and expect a boost in M&A activity for the year ahead. Also:

  • Globally, 24% of all respondents indicated that the key challenge with their portfolio reviews was the lack of effective metrics to measure how business contributed to strategy and total shareholder returns. Other key challenges cited were the ability to compare portfolio businesses against industry performance benchmarks (global 23%); and the disconnect between portfolio review and necessary M&A actions (global 18%).
  • 98% of global respondents had indicated they were planning some form of transaction over the next 12 months. Some 37% of all respondents who indicated the intention to do so also indicated they were planning an M&A in the next year, while 44% globally had indicated they were planning to chase divestments or IPOs; while 47% had cited plans to actively pursue a strategic partnership with a third party.
  • 93% of all respondents11 had cited pausing or canceling a transaction in the past 12 months. The top reasons for doing so were geopolitical uncertainty (global 18%), valuation gap (global 15%) and regulatory uncertainty (global 16%)12.
  • 33% of all respondents13 saw supply chain pressures as major disruptive forces, and 29%14 had indicated climate change and environmental issues as such disruptions.
  • The variances among respondents from Singapore against their global peers were interpreted by EY analysts were as follows:
  • They face greater pressure from global geopolitical challenges given their business exposure to jurisdictions around the world.
  • Evolving regulations were a top concern as Singapore is a trade-reliant economy, and any perceived tightening of regulations, especially those affecting cross-border trades, can have a material impact on Singapore enterprises.
  • Singapore respondents should perform scenario planning and supply chain risk management to address the risks.
  • Changing customer needs were also concerning for the respondents, as their customers today are constantly bombarded with information and choice, and so respondents’ firms need to continually innovate and differentiate themselves to remain appealing.

Addressing the global respondents’ sentiments for this quarter of 2024, Sriram Changali, EY-Parthenon Asean Value Creation Leader, said a “combination of pragmatic optimism and a fear of being left behind is expected to drive investment and activity over the coming months. At the same time, emerging technologies like generative AI have brought the war for talent closer to their doorsteps. Hence, CEOs will need to move from being reactive to proactive in a bid to get ahead and capitalize on the disruptive forces at play.”

Added Andre Toh, EY Asean and Asia-Pacific Valuation, Modeling & Economics Leader: “Intangibles such as technology, customers and brand names can become attractive M&A propositions in the information age today, as they are value accretive without overloading the balance sheet. However, companies need to be mindful of the disconnect between portfolio and necessary M&A actions; the lack of effective metrics to measure how business units contribute to strategy and total shareholder return; and the difficulty in comparing against industry performance benchmarks for transactions involving intangibles.” 

*including 40 from Singapore, forming 3% of the global sample population
170% among Singapore respondents
213% among Singapore respondents
364% among Singapore respondents
423% among Singapore respondents
5Same for Singapore respondents
623% among Singapore respondents
7Same for Singapore respondents
848% among Singapore respondents
940% among Singapore respondents
1033% among Singapore respondents
1162% among Singapore respondents
1220%, 18% and 15% among Singapore respondents respectively
1329% among Singapore respondents
1418% among Singapore respondents