- 55% of CEOs in November 2008 Still had a Positive Outlook for Their Business in the Next 12 Months Down From the Peak of 89% in January 2007
- 49% of Companies Planning to do at Least One M&A Deal in 2009, Although the Overall Value of M&A Deals is Expected to Decline Sharply
- 65% of Companies Planning to Pursue an M&A Deal Will Fund it With Cash and Shares
- Asia is the Priority for Investment for CEOs Because it is Perceived as Having the Most Potential for Revenue Growth in 2009
- 83% of Executives in Sub-Saharan Africa Considered the Prospects for 2009 as Good
- The US Poses the Greatest Operational and Financial Risk for CEOs in 2009
- Investment in Sales and Marketing is the Priority for CEOs in 2009
- 54% of IT Companies and 57% of Energy and Infrastructure Firms Predicted a Good Year Ahead for Their Businesses. Transport Companies, Financial Services Firms and Retailers are the Gloomiest
Despite the sharp fall in global business confidence business leaders saw opportunities for their businesses in 2009, according to a report undertaken by the Economist Intelligence Unit (EIU) in November 2008 commissioned by international legal practice, Norton Rose Group.
The report, CEO Briefing 2009, is based on a global survey of 924 CEOs and C-level executives worldwide completed by the EIU following the financial turmoil that unfolded in September 2008. The aggregate annual turnover of respondents' businesses exceeds US$2000bn. The regional breakdown of respondents is 211 Asia Pacific; 303 Europe; 192 North America; and 218 Middle East and rest of world. The results make comparisons with the last CEO Briefing study which was conducted in 2007.
Prospects for 2009 - opportunities remain despite steep fall in business confidence
*In the seven years that the EIU has asked CEOs for their outlook for the coming 12 months confidence has fallen to an all time low. Fifty-five per cent of respondents believed the prospects for their business to be good in 2009 compared to the peak of 89% in January 2007. Despite the current economic climate however 62% said they had not so far been adversely affected by the events in the financial services sector.
Sub-Saharan Africa had the most bullish outlook, with 83% of executives considering the prospects for 2009 as good. These optimistic figures emerged despite 71% of respondents viewing the global economic outlook as negative.
Executives in IT and energy and infrastructure are most positive
Fifty-four per cent of IT companies and 57% of energy and infrastructure firms predicted a strong 2009. Technology companies are likely to be optimistic on the back of greater prospects for automation as firms seek to cut costs, while the infrastructure sector will seek to benefit from a renewed focus on infrastructure spending as a source of job creation during a downturn. In contrast, the retail sector, financial services firms and transport industry are the most pessimistic with 25%, 31% and 34% of respondents in those sectors, respectively, describing the outlook as "bad" or "very bad".
Companies wary of the risks of doing business in the US
The US is viewed by 51% of respondents as the riskiest place to do business, with companies globally identifying the US as the greatest source of operational and financial risk. Asian companies are noticeably wary about the risks involved in doing business in the US, although concerns are highest among US companies themselves (71%).
M&A opportunities still exist
Forty-nine per cent of respondents are planning to do at least one deal in 2009, signalling that a number of companies are planning to take advantage of the market environment to expand their business. The greatest impediment these companies are likely to face is funding given the lack of debt-financing. As a result, 65% of respondents who plan to pursue an M&A deal say they will fund it with cash and shares.
Firms to continue investing, despite cost controls being a priority
A focus on costs rather than topline growth is a key priority for chief executives in 2009. Nearly one-quarter of chief executives will reduce their payroll this year, while over half aim to conserve cash by streamlining internal processes. Nearly one-quarter will increase their use of IT to automate processes. Despite the difficult macro-economic backdrop, many companies will continue to invest in their brands and infrastructure. Sales and marketing is given the highest priority for new investment by 37% of respondents while 32% cited R&D. This is an increase from last year's report where 36% said they would make sales and marketing their highest priority and only 26% said R&D, demonstrating that some companies have ambitions beyond short-term survival.
Asia
Asia is signalled out as the most popular destination for new investment in the next 12 months. Forty-one percent of respondents identified the region as providing the greatest source of revenue growth in 2009. Accordingly, the Asia Pacific region is predicted to be the most active in M&A activity in 2009 with 51% of Asian respondents saying they will be involved in a merger in the next 12 months and almost one-third predicting they will complete two to five deals - the most optimistic outlook of all regions.
Peter Martyr, Chief Executive of Norton Rose LLP commented:
"Whilst the financial mood in many quarters is dark, our CEO Briefing survey demonstrates that not all businesses are pessimistic about their prospects for the coming 12 months."
"Asia has been identified as the region where most new investment will take place in 2009 with business leaders expressing far more optimism for growth in this region than any other. Interestingly African executives have emerged as the most optimistic about their outlook for the coming 12 months perhaps signalling future activity in this market. From an M&A perspective, while the overall value of deals will decline sharply in 2009, it is promising to see that almost half of respondents are planning to do deals in the coming 12 months."
