Global CFOs say this is the time for dealmaking, not preserving money, CNBC survey reveals

ByteDance Ltd.’s TikTok web site is displayed on a smartphone in an organized {photograph}.

Andrew Harrer | Bloomberg | Getty Images

As Walmart says it is teaming up with Microsoft in the ongoing race to accumulate TikTok, a brand new survey from CNBC finds that almost all CFOs consider this is, in actual fact, the time for corporations to be hanging such offers, reasonably than preserving money. According to a brand new survey, sixty-five % of CNBC Global CFO Council members say they disagree that “this is no time for dealmaking, and also disagree that “corporations must be preserving money.” The response was largely driven by more than two-thirds of EMEA CFOs and half of APAC CFOs who disagreed with the statement(s).

Meanwhile, 40% of CFOs surveyed agree that the uncertainty surrounding the ongoing Covid-19 pandemic makes offers “extraordinarily tough” to do, which is likely a result of corporate distress in the first half of 2020. Earlier this year, Xerox dropped its bid to merge with HP citing the international well being disaster. The Wall Street Journal stories that Chapter 11 enterprise bankruptcy filings increased 26% in the first half of this year as more companies sought protection from creditors during the pandemic, according to legal-services firm Epiq Systems.

“The have to protect liquidity and protect money is going to be very circumstantial primarily based on the place you’re in the world, and the state of your individual firm,” said J. Neely, Managing Director and Global M&A lead for Accenture Strategy. “I believe the world is beginning to understand that we will be working this method for fairly awhile … so, we will have to determine methods to transfer on.”

The survey findings also come as TikTok’s Beijing-based parent company, ByteDance, is nearing an agreement to sell its U.S., Canadian, Australian and New Zealand operations in a deal that’s likely to be in the $20 billion to $30 billion dollar range, according to sources. Oracle is competing with Microsoft and Walmart to acquire the tech company. And while TikTok may be the most high-profile and dramatic deal in the news, Refinitiv data shows that more than 1,000 deals were signed in Asia-Pacific for the month of July, compared to 850 in the U.S. and 816 in Europe.

Among those deals are the $21 billion settlement wherein Seven & i Holdings, the Japanese owner of 7-Eleven convenience stores, acquired Marathon Petroleum’s Speedway. German health-care company Siemens Healthineers additionally introduced this month it was shopping for Varian Medical Systems for more than $16 billion. Despite ongoing economic uncertainty, Google Cloud and Blackrock also say that they are open to deals.

“If you look in June and July, abruptly we had a complete string of mega offers — offers over $1 billion, $10 billion — the likes of which we had not seen in awhile,” said Neely. “I believe that really brings some mild again into the market a bit.”

The CNBC Global CFO Council represents some of the largest public and private companies in the world, collectively managing more than $5 trillion in market value across a wide variety of sectors. The Q3 2020 survey was conducted between Aug. 7 and Aug. 22. among 40 global members of the council.

As many companies look to strengthen their balance sheets in the second half of the year, the survey also found that half of all respondents agree that an environment of “company ‘haves’ and ‘have-nots’ units up fertile floor for dealmaking,” driven largely by consensus from North American and APAC CFOs.

“I believe in this world of ‘haves’ and ‘have-nots,’ in case you’re a CFO, you actually do should be working that calculus in your head of preserving your stability sheet sturdy sufficient to climate the storm … you could possibly end up in a world the place you have abruptly turn out to be a ‘have-not’ and your again is up towards a wall,” Neely said.

Asked about exits in the second half of the year and popular emerging investment vehicles such as SPACs, or particular objective acquisition corporations, Neely asserted that offers will probably be “much less about vertical integration or consolidation and extra about utilizing totally different sorts of offers to entry capabilities and re-configure worth chains,” pointing to technology as the biggest opportunity.

A SPAC is a blank-check company formed to raise funds to finance a merger or acquisition within a certain time frame, typically two years. The target firm will be taken public through the acquisition. Yesterday, the New York Stock Exchange won the approval from regulators to allow companies to issue new shares through direct listings such as these, creating a cheaper alternative to the traditional initial public offering.

“Any firm that is been in a position to pivot or embrace expertise to make sure the viability of their operations has been in an excellent place there,” Christian Sealey of Morrow Sodali told CNBC’s “Capital Connection.” “We’ve began to see … globally, a rise in technology-related transactions, and I believe that may proceed.” According to the survey, 50% of CFOs agree that technology will be the sector that shows the biggest growth over the next six months.

“I believe individuals have seen that plenty of their elementary methods are nonetheless holding water for the sorts of issues they need to do, however this [pandemic] has additionally pushed an incredible curiosity in digital property,” which Neely additionally factors to as one among the most necessary alternatives in international M&A as corporations proceed to make sure their portfolios are effectively positioned for the future.

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