The confidence of chief executives across the globe has risen sharply with a big increase in their plans for capital spending and acquisitions, according to a survey of investment banking clients.
The survey of Goldman Sachs's top 100 clients shows a big improvement in chief executives' general business outlook between April and July and a doubling in their plans for mergers and acquisitions.
Plans for capital spending on existing assets rose by more than a third compared with the first quarter, with US firms particularly bullish. "Essential investments have been put off long enough and pressure to replace equipment is rising," the survey says.
The findings come amid further evidence of an upturn in US industry with new orders manufactured goods up 1.7 per cent in June, slightly ahead of expectations.
The chief executives surveyed by Goldman Sachs said that strong cash flow, increasing confidence in reported earnings and the recent rally in the equity markets had led many to dust off plans for acquisitions.
Mr Jim O'Neill, who carried out the research for Goldman, said anecdotal comments suggested domestic deals were more favoured than cross-border transactions.
There was also a clear preference among companies for horizontal consolidation (mergers among peers) rather than vertical consolidation (mergers between suppliers and users), particularly in Europe. But Mr O'Neill said there had been an increase in interest in vertical deals, which indicated the chief executives were "gingerly confident".
"It has been nearly three years since the dotcom bubble burst and the corporate world has been so quiet that there is now a slow, itching desire to do something," Mr O'Neill said.
Private equity companies are also bullish about recovery, according to bankers, who say there has been a shift on the part of both sellers and buyers.
"Private sellers are no longer in denial about value declines. Acquirers see this, they feel flush with cheap financing and less chastened by governance furore. They too have put off important moves," he said.
These views are echoed in the latest confidence index from Cinven, the UK-based private equity group, which in June found 33 per cent of bankers polled across Europe expect the overall economic climate to improve over the next six months, with only 12 per cent expecting it to worsen, compared with 47 per cent six months ago.
But the confidence expressed in the Goldman survey did not translate into activity. M&A deals in Europe declined for the second month in a row in July, according to data from analysts Dealogic. - (Financial Times Service)
