Acquisitions are back on the agenda for chief executives of companies attending the World Economic Forum.
Cost cutting, capital raising and debt refinancing mean that a lot of the more profitable companies now have strong enough balance sheets to be opportunistic if a deal is presented. Debt markets are also open again to help finance deals, and market gains mean their shares can be used as currency in transactions.
Buying growth through purchases may also be more attractive than trying to expand current businesses organically, given concerns about how fast the economies of Europe and the US will recover this year.
But chief executives are looking for bolt-on acquisitions, not massive deals that transform businesses.
Mike Fries, chief executive of pay-TV company Liberty Global is eager to expand across 10 countries in Europe. “We are opportunistic on the merger and acquisition front. If something came up that fits us perfectly we would have to look at it.”
Kraft Foods Inc’s $18.7-billion deal for Cadbury was likely to make companies more confident as they consider big deals, said Mark Foster, group chief executive for management consulting at Accenture.
The heads of three of the biggest private equity companies in the world, Stephen Schwarzman, Henry Kravis and David Rubenstein, made it clear that they expect to do more acquisitions. Moreover, Brazilian and Chinese companies are also set to make a significant contribution to dealmaking.