/l` akkm] Outlook October 2012 April 2013

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With a recovery taking longer than expected to arrive, companies are focusing on bottom-line improvements About this survey
L`] ?dgZYd ;YhalYd ;gf\]f[] :Yjge]l]j ak Y j]_mdYj kmjn]q g^ k]fagj ]p][mlan]k from large companies around the world, [gf\m[l]\ Zq l`] =[gfgeakl Afl]dda_]f[] Unit (EIU). Our panel comprises select =jfkl  Qgmf_ [da]flk Yf\ [gflY[lk Yf\ regular EIU contributors. This snapshot of gmj f\af_k _Ym_]k [gjhgjYl] [gf\]f[] af l`] ][gfgea[ gmldggc$ Yf\ al a\]fla]k ZgYj\jgge lj]f\k Yf\ hjY[la[]k af l`] oYq companies manage their capital agenda.

Gmj k]n]fl` ?dgZYd ;YhalYd ;gf\]f[] :Yjge]l]j f\k l`Yl d]Y\af_ [gehYfa]k k]] dalld] aee]\aYl] hjgkh][l g^ Y j][gn]jq ^gj l`] _dgZYd ][gfgeq& O`ad] l`] kalmYlagf `Yk klYZadar]\ af kge] eYjc]lk$ egkl ]p][mlan]k ]ph][l l`ak \goflmjf lg ]f\mj] ^gj Yl d]Ykl Y q]Yj$ o`ad] eYfq ][gfgeaklk l`afc al [gmd\ h]jkakl ^gj l`j]] q]Yjk gj egj]&
The Eurozone crisis and slowing growth in emerging markets, such as China and India, `Yn] \Yeh]f]\ _dgZYd ][gfgea[ [gf\]f[] Yf\ ]ph][lYlagfk Yjgmf\ [gjhgjYl] ]Yjfaf_k& L`ak `Yk d]\ lg ka_fa[Yfldq j]\m[]\ gj_Yfa[ Yf\ afgj_Yfa[ _jgol` YkhajYlagfk& L`] ^g[mk gf _jgol` af l`] f]Yj l]je oadd Z] eYafdq gj_Yfa[ Yk l`] Yhh]lal] ^gj E9 `Yk declined. Despite strong fundamentals for deals, including rising cash stock piles and adequate credit, there is a lesser appetite for acquisitions and divestments compared oal` Yfq hj]nagmk ]\alagf g^ gmj ZYjge]l]j& ;gfljaZmlaf_ lg l`] dY[c g^ [gf\]f[] Yjgmf\ E9 Y[lanalq ak l`] k]flae]fl Zq eYfq ]p][mlan]k l`Yl Y[imakalagf lYj_]lk are over-priced. O`Ylk f]pl7 ;gehYfa]k Yj] j]^g[mkaf_ gf l`] ZYka[k2 [gkl j]\m[lagf$ h]j^gjeYf[] improvement, capital allocation and targeted organic and inorganic growth initiatives \geafYl] l`] ZgYj\jgge Y_]f\Y& L`gk] o`g ]p][ml] af Y \ak[ahdaf]\ oYq oadd Z] Z]kl hgkalagf]\ o`]f ][gfgea[ [gf\]f[] j]lmjfk& Hah E[;jgkla]$ Global Vice Chair$ LjYfkY[lagf 9\nakgjq K]jna[]k

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kmjn]q]\ af 9m_mkl Yf\ K]hl]eZ]j *()*

Companies from 41 countries Cross-section of respondents from

*, k][lgjk

754 CEO, CFO and other C-level

respondents Egj] l`Yf ,(( [gehYfa]k ogmd\ imYda^q for the Fortune 500 based on revenue

The Capital Agenda

:Yk]\ Yjgmf\ ^gmj \ae]fkagfk$ al `]dhk companies consider their issues and challenges, understand their options and make more informed capital decisions. 1. Preserving capital: reshaping the operational and capital base 2. Optimizing capital: driving cash and working capital and managing the portfolio of assets 3. Raising capital: assessing future capital requirements and assessing funding sources 4. Investing capital: strengthening investment appraisal and ljYfkY[lagf ]p][mlagf

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Global economic outlook has weakened
9k l`] kdgo\gof h]jkaklk af \]n]dgh]\ Yf\ ]e]j_af_ economies, companies are less optimistic about the future l`Yf l`]q o]j] kap egfl`k Y_g& Gfdq ** g^ j]khgf\]flk Z]da]n] l`] _dgZYd ][gfgea[ kalmYlagf ak aehjgnaf_$ \gof ^jge -* af 9hjad& L`]j] `Yk Ydkg Z]]f Yf increase in the number of companies who report declining k]flae]fl$ ^jge *( lg +)& What is your perspective on the state of the global economy today?
26% 52% 22%

Na]ohgafl
A new sense of commitment by policymakers
Kdgoaf_ ][gfgea[ _jgol` Yjgmf\ l`] ogjd\ ak Y c]q akkm] ^gj []fljYd ZYfck Yf\ hgda[qeYc]jk& EYfq `Y\ `gh]\ l`Yl Y j]lmjf lg _jgol` af \]n]dgh]\ eYjc]lk$ Ydgf_ oal` kljgf_ ege]flme af ]e]j_af_ ][gfgea]k$ ogmd\ `Yn] khYjc]\ Y _dgZYd j][gn]jq Yf\ j]\m[]\ l`] f]]\ ^gj egj] \jYkla[ hgda[q Y[lagf& J][]fl egfl`k `Yn] k]]f hgda[qeYc]jk j]Y[` ]n]f \]]h]j aflg l`] lggdcal& K]hl]eZ]j kYo Zgd\ Y[lagf gf Y fmeZ]j g^ ^jgflk& Gf . K]hl]eZ]j$ l`] =mjgh]Yf ;]fljYd :Yfc =;:! Yffgmf[]\ YeZalagmk hdYfk lg Zmq l`]gj]la[Yddq mfdaeal]\ imYflala]k g^ Zgf\k ^jge kljm__daf_ =mjgrgf] [gmflja]k& Kap \Yqk dYl]j Y^l]j gmj kmjn]q [dgk]\ l`] ?]jeYf ;gfklalmlagfYd ;gmjl ZY[c]\ l`] =mjgh]Yf KlYZadalq E][`Yfake$ o`a[` [geealk l`] =;: lg Z]af_ Y d]f\]j g^ dYkl j]kgjl$ oal` /(( Zaddagf g^ [YhalYd Yl alk \akhgkYd& L`] ^gddgoaf_ \Yq$ l`] MK >]\]jYd J]k]jn] Yffgmf[]\ al ogmd\ Zmq MK,( Zaddagf g^ egjl_Y_]%ZY[c]\ k][mjala]k ]n]jq egfl` lg khmj l`] j]Yd ]klYl] eYjc]lk Yf\ `gd\ mh Ykk]l hja[]k& L`ak ak Yf aehgjlYfl ege]fl af l`] _dgZYd ][gfgea[ [q[d]& L`] hgda[q Y[lagfk lYc]f af l`] =mjgrgf] lg_]l`]j oal` l`] hjgeak] g^ k[Yd mfagf [gmd\ j]hj]k]fl Y lmjfaf_ hgafl af l`] [jakak$ hgl]flaYddq \][j]Ykaf_ ngdYladalq& 9f\$ Zq ]eZYjcaf_ gf I=+$ l`] >]\]jYd J]k]jn] `Yk Ydkg ka_fYd]\ alk afl]flagf lg lYc] Zgd\ Y[lagf& @go]n]j$ l`]j] j]eYaf \]]h%k]Yl]\ kljm[lmjYd hjgZd]ek l`Yl oadd Z] \a^[mdl lg gn]j[ge]& L`]k] e]Ykmj]k eYq gfdq hjgn] lg `Yn] k`gjl%dan]\ Z]f]lk$ Zml l`]q \g \]egfkljYl] Y j]f]o]\ k]fk] g^ mj_]f[q Yegf_ hgda[qeYc]jk lg lY[cd] l`] ][gfgea[ \goflmjf gf[] Yf\ ^gj Ydd&

37%

47%

28% 37% 31% 20%

Oct-11

Apr-12

Oct-12

Q Improving Q Stable Q Declining

22%

view the global economy as improving compared with 52% in April

Egj] l`Yf `Yd^ ]ph][l l`] _dgZYd ][gfgea[ \goflmjf lg h]jkakl ^gj Yfgl`]j gf] lg log q]Yjk$ o`ad] )- hj]\a[l al oadd dYkl egj] l`Yf log q]Yjk& Oal` kdgo _jgol` ]ph][l]\ lg [gflafm]$ eYfq companies are focusing on bottom-line improvements and dgo%jakc gj_Yfa[ _jgol` ghhgjlmfala]k& >]o k]] l`] mj_]f[q ^gj [gf\m[laf_ eYbgj E9 ljYfkY[lagfk af km[` Yf mf[]jlYaf [daeYl]& How long does your organization expect the global economic downturn to persist?
51%

27% 15% 7%
06 months 612 months 12 years More than 2 years

66%
*

believe the economic downturn is likely to persist for at least another year

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Local economic sentiment weakens

In line with the global results, local economic sentiment has also declined. Ten countries with the highest percentage of respondents holding negative views on their local economies

Na]ohgafl
The Eurozone crisis continues to dominate
9 j]_agfYd \a^[mdlq `Yk Z][ge] Y _dgZYd hjgZd]e Ydegkl 1( g^ j]khgf\]flk [al] l`] =mjgrgf] [jakak Yk Y^^][laf_ l`]aj Zmkaf]kk& Kap egfl`k Y_g$ l`] =mjgrgf] oYk j][g_far]\ af ZgYj\jggek Yk Yf aehY[l$ oal` [gflaf_]f[q hdYfk Yjgmf\ [mjj]f[a]k Yf\ o`a[` [gmflja]k ea_`l ]pal l`] ]mjg& Egj] j][]fldq$ `go]n]j$ l`] =mjgrgf] `Yk Z]]f j][g_far]\ Zq [gehYfa]k Yjgmf\ l`] ogjd\ Yk Y dgf_%l]je kljm[lmjYd akkm] lg Z] [gfka\]j]\ af dgf_%jYf_] Zmkaf]kk hdYffaf_& O`ad] l`] =;: [gflafm]k lg lYc] Y[lagf lg [Yde l`] [jakak$ l`] j]_agfk ][gfgea[ hjgZd]ek Yj] ^Yj ^jge j]kgdn]\& 9k dgf_ Yk ][gfgea[ klY_fYlagf h]jkaklk$ l`] =mjgrgf] oadd [gflafm] lg Z] Y \jY_ gf l`] ZjgY\]j _dgZYd ][gfgeq$ Y^^][laf_ alk ljY\af_ Yf\ ]phgjl hYjlf]jk$ hgl]flaYddq ^gj q]Yjk lg [ge]& D]Y\af_ [gehYfa]k Yj] lYcaf_ hjgY[lan] e]Ykmj]k$ km[` Yk j]\m[af_ [gklk lg j]da]n] hj]kkmj] gf eYj_afk$ Yf\ Z]ll]j eYfY_af_ [gmfl]jhYjlq \]^Ymdl jakc Yf\ kmhhdq%[`Yaf jakc&

Italy India Singapore Sweden Spain United Kingdom Netherlands France South Africa Malaysia 0% 10%

59% 44% 40% 40% 39% 39% 37% 26% 25% 24%
20% 30% 40% 50% 60%

:q Yf\ dYj_]$ l`] [gmflja]k oal` l`] egkl f]_Ylan] k]flae]fl Yj] l`gk] egkl Y^^][l]\ Zq l`] =mjgrgf] [jakak Yf\ kdgoaf_ growth in China.

89%

believe the Eurozone crisis has affected their business

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L`]j] `Yk Z]]f Y eYjc]\ \][daf] af ]ph][lYlagfk ^gj [gjhgjYl] ]Yjfaf_k$ oal` gfdq +( g^ j]khgf\]flk hgkalan] YZgml l`] gmldggc af G[lgZ]j *()*$ [gehYj]\ oal` ,, af 9hjad& L`] \][daf] af [gjhgjYl] ]Yjfaf_k ]ph][lYlagfk ak [gfkakl]fl across all geographies. O`Yl Yj] l`] egkl ka_fa[Yfl [`Ydd]f_]k ^Y[af_ qgmj business in light of the Eurozone crisis? (Select two)
Revenue and margin pressure Counterparty default risk Credit availability

41% 28% 21% 21% 20% 12% 11% 8%

30%

are positive about earnings, compared with 44% in April

Supply-chain risk Increased regulation Price/valuation of M&A assets Treasury management and banking relationships Taxation

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Fewer expect to create jobs

In light of economic challenges, the percentage of respondents hdYffaf_ lg [j]Yl] bgZk `Yk \][j]Yk]\ ^jge ,) af 9hjad lg *0 af G[lgZ]j& L`] h]j[]flY_] g^ l`gk] o`g hdYf lg eYaflYaf l`]aj ogjc^gj[] `Yk af[j]Yk]\ ka_fa[Yfldq ^jge ,/ lg -1& L`ak eYq j]][l Y oYal%Yf\%k]] Yllalm\] Yegf_ [gehYfa]k l`Yl Yj] kaemdlYf]gmkdq mfoaddaf_ lg lYc] jakck Zml j]dm[lYfl lg dgk] ]paZadalq k`gmd\ Z]ll]j lae]k j]lmjf& With regard to employment, which of the following does your organization expect to do in the next 12 months?
36% 41% 28%

59% 49%
Q Create jobs/hire talent

47%

Q Keep current workforce size Q Reduce workforce numbers

15%
Oct-11

12%
Apr-12

13%
Oct-12

28%

are seeking to increase their workforce in light g^ ][gfgea[ [`Ydd]f_]k$ Y ka_fa[Yfl k`a^l from 41% in April

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Modest decline in credit availability
O`ad] [j]\al ak ZjgY\dq YnYadYZd]$ hYjla[mdYjdq lg dYj_]%[Yh enterprises, respondents do cite a modest decline in credit YnYadYZadalq& Gfdq *. na]o [j]\al eYjc]lk Yk aehjgnaf_$ [gehYj]\ oal` +( af 9hjad& ;gehYj]\ oal` log q]Yjk Y_g$ ZYfck Yj] gf Y kljgf_]j ^gglaf_ Yf\ Z]ll]j [YhalYdar]\& Q]l l`ak `]Ydl`a]j ha[lmj] \g]k fgl YdoYqk ljYfkdYl] aflg af[j]Yk]\ d]f\af_& EYfq ZYfck `Yn] la_`l]f]\ d]f\af_ klYf\Yj\k$ hYjla[mdYjdq ^gj keYdd%lg%e]\ame ]fl]jhjak] KE=! Zgjjgo]jk& :Yfck Ydkg ^Y[] `a_`]j [YhalYd j]imaj]e]flk mf\]j aeh]f\af_ :Yk]d AAA j]_mdYlagfk$ o`a[` [gmd\ j]klja[l l`]aj YZadalq lg af[j]Yk] l`] go g^ [j]\al aflg l`] ][gfgeq& Hd]Yk] af\a[Yl] qgmj d]n]d g^ [gf\]f[] af [j]\al availability at the global level
34% 24% 30% 26% 27% 33%

Deleveraging continues
;gehYfa]k ]ph][l lg [gflafm] lg \][j]Yk] \]Zl d]n]dk& =a_`lq%log h]j[]fl ]ph][l lg k]] l`]aj \]Zl%lg%[YhalYd jYlagk j]eYaf klYZd] gj ^Ydd gn]j l`] q]Yj Y`]Y\& ;gehYfa]k Yj] [`ggkaf_ lg j]laj] \]Zl Yf\ \]hdgq [YhalYd egj] [Ymlagmkdq& How do you expect your companys debt-to-capital ratio to change over the next 12 months?
22% 21% 18% 49%

51%

45%

44% 45%

44%

Oct-11

Apr-12

Oct-12

Q Increase Q Remain constant Q Decrease

J]fYf[af_ kdgok
32% 25% 30%

Oct-11

Apr-12

Oct-12

Q Improving Q Stable Q Declining

Gfdq *. g^ [gehYfa]k hdYf lg j]fYf[] l`]aj Zgjjgoaf_k gn]j l`] f]pl )* egfl`k$ \gof ^jge +, af 9hjad& Egkl Yj] \gaf_ so in order to optimize their capital structures, reduce the size g^ l`]aj afl]j]kl Zaddk gj ]pl]f\ l`] eYlmjalq g^ l`]aj \]Zl& EYfq =mjgh]Yf Zgjjgo]jk `Yn] mk]\ l`] MK hjanYl] hdY[]e]fl eYjc]l lg j]fYf[] ]paklaf_ ZYfc dgYfk& <g]k qgmj [gehYfq hdYf lg j]fYf[] dgYfk gj gl`]j \]Zl obligations in the next 12 months?
29% 34% 26%

30%

view credit availability as declining, compared with 25% in April

71% 66%

74%

Oct-11

Apr-12

Oct-12

Q Yes Q No

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Declining growth sentiment
HjagjalarYlagf g^ _jgol` `Yk \][daf]\ kl]]hdq Yk [gehYfa]k Yj] egj] ^g[mk]\ gf l`] ^mf\Ye]flYdk& ;gehYj]\ oal` kap egfl`k ago, our respondents report an increased focus on reducing [gklk$ aehjgnaf_ ]^[a]f[q Yf\ ghlaearaf_ [YhalYd& 9k ]p][mlan]k assess how to compete in an environment where there is lower ]ph][l]\ _jgol`$ l`ak k`a^l af ]eh`Ykak lgoYj\ aehjgnaf_ Zgllge%daf] h]j^gjeYf[] Yf\ k]]caf_ gml f]o oYqk lg aehjgn] internal performance is understandable. Nonetheless, growth remains the number-one objective, with ,) j]hgjlaf_ l`Yl _jgol` ak l`]aj hjaeYjq ^g[mk& @go]n]j$ l`ak is the lowest percentage of respondents citing growth as their lgh hjagjalq kaf[] G[lgZ]j *()(& L`gk] [gehYfa]k ^g[mk]\ gf growth tend to prioritize lower-risk organic strategies that are within their comfort zone. Rather than pursuing ambitious, ljYfk^gjeYlagfYd \]Ydk$ l`]q Yj] `ghaf_ lg \]dan]j _jgol` l`jgm_` Z]ll]j ]p][mlagf af ]paklaf_ eYjc]lk$ [`Yf_af_ l`] [mjj]fl eap g^ hjg\m[lk Yf\ k]jna[]k$ a\]fla^qaf_ f]o kYd]k channels, and developing new products and markets through l`] ]phdgalYlagf g^ l][`fgdg_q& Which statement best describes your organizations focus over the next 12 months?  ^g[mk]\ gf _jgol`
41%
Growth Cost reduction and gh]jYlagfYd ]^[a]f[q EYaflYafaf_ klYZadalq Survival

What is the primary focus of your companys organic growth?

More rigorous execution of core products/ existing markets New sales channels Exploiting technology to develop new markets/ products Changing mix of existing products & services Increasing research & development

26%

22%

19%

17%

16%

41%

are focused on growth, compared with 52% in April

51% 49%

52%

31%
46% 41%

25%

3%
Oct-10 Apr-11 Oct-11 Apr-12 Oct-12

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L`] gn]jYdd \][dafaf_ k]flae]fl gf _jgol` ak hYjla[mdYjdq hjgfgmf[]\& =n]f l`] Yhh]lal] ^gj gj_Yfa[ _jgol` j]][lk l`ak lj]f\& J]khgf\]flk afl]flagfk oal` j]_Yj\ lg ]p[]kk [Yk` mf\]jdaf] l`] \][dafaf_ k]flae]fl lgoYj\ _jgol`& Gfdq +. hdYf lg \]hdgq ]p[]kk [Yk` lgoYj\ gj_Yfa[ _jgol`$ [gehYj]\ oal` -( af 9hjad& Returning cash to stakeholders shareholders and creditors ak fgo l`] hjagjalq$ oal` +) g^ j]khgf\]flk hdYffaf_ lg mk] ]p[]kk [Yk` lg hYq \gof \]Zl$ n]jkmk )0 af 9hjad& L`ak hjgna\]k further evidence that companies are focusing their attention on deleveraging and strengthening their balance sheets against a ZY[c\jgh g^ gf_gaf_ mf[]jlYaflq& If your company has excess cash to deploy, which of the following will be your focus over the next 12 months? Growth slows...

Na]ohgafl
Are companies prepared for a return to economic growth?
L`] ^g[mk gf gj_Yfa[ Yf\ afgj_Yfa[ _jgol` `Yk \][daf]\ ka_fa[Yfldq Yk [gehYfa]k Yj] hgkalagfaf_ l`]ek]dn]k ^gj Y kdgo j][gn]jq oal` dgo gj klY_fYfl _jgol` jYl]k& L`] =mjgrgf] [`Ydd]f_]k$ Ydgf_ oal` kdgoaf_ _jgol` af ]e]j_af_ eYjc]lk$ Yj] \janaf_ l`ak egj] [gfk]jnYlan] k]flae]fl& O`Yl oadd al lYc] lg _]l _jgol` ZY[c gf ljY[c7 K]n]jYd af_j]\a]flk emkl Z] af hdY[] [gflafm]\ Zgd\ egn]k Zq l`] =;:$ l`] e]j_af_ g^ k[Yd Yf\ hgdala[Yd Y_]f\Yk af l`] =mjgrgf]$ j]^gje af ]e]j_af_ eYjc]lk$ Yf\ l`] cfg[c%gf ]^^][lk g^ af[j]Yk]\ ljY\] gok ^jge ]e]j_af_ eYjc]lk lg l`] =mjgrgf] af gj\]j ^gj Y j]lmjf lg _jgol`& Afl]j]klaf_dq$ l`] k]flae]fl Zq l`] eYbgjalq g^ gmj j]khgf\]flk 0/! lg eYaflYaf gj _jgo l`]aj ogjc^gj[] ak Y ka_f l`Yl eYfq [gehYfa]k Yj] c]]haf_ c]q jgd]k Yf\ af^jYkljm[lmj] af hdY[] Yf\ eYaflYafaf_ ]paZadalq lg lYc] Y\nYflY_] g^ Yfq aehjgn]e]fl af l`] ][gfgeq&

36%
Organic growth (R&D, capex)

50% 49% 13%

Inorganic growth (M&A)

16% 15%

Q Oct-12 Q Apr-12 Q Oct-11

Cash is returned to stakeholders...

31%
Pay down debt

18% 22% 12%

Pay dividends

11% 10% 8%

Buy back stock

5% 4%

Oct-12 Apr-12 Oct-11

51%

with excess cash are focused on returning cash to shareholders and creditors

?dgZYd ;YhalYd ;gf\]f[] :Yjge]l]j

E]j_]jk Yf\ Y[imakalagfk gmldggc

Appetite for M&A declines
9ea\ mf[]jlYaflq YZgml l`] _dgZYd ][gfgea[ gmldggc$ [gehYfa]k Yj] af[j]Ykaf_dq oYjq g^ Y[imakalagfk Yf\ l`]aj h]j[]an]\ jakck& Bmkl *- g^ j]khgf\]flk fgo ]ph][l lg hmjkm] Y[imakalagfk gn]j l`] f]pl )* egfl`k$ \gof ^jge +) af 9hjad Yf\ ,) Y q]Yj Y_g& Al ak fgl bmkl Y dY[c g^ [gf\]f[] af l`] Zmkaf]kk ]fnajgfe]fl l`Yl ak `gd\af_ [gehYfa]k ZY[c eYfq are also concerned about the gap between their valuation of hgl]flaYd Y[imakalagfk Yf\ l`] hja[]k kgm_`l Zq k]dd]jk& >gj eYfq [gehYfa]k$ l`] afl]fl Yjgmf\ E9 `Yk \][daf]\& >an] q]Yjk Y^l]j l`] fYf[aYd [jakak$ eYfq ]p][mlan]k Yj] oYalaf_ ^gj Y kmklYaf]\ j][gn]jq Z]^gj] lYcaf_ Y[lagf& Do you expect your company to pursue acquisitions over the next 12 months?  kYqaf_ q]k What is the expected deal size?
46% 38%

9%
US$50m or less US$51mUS$500m US$501mUS$1b

7%
More than US$1b

Oct-12

84%

expect to do deals of US$500m or less

41% 38%

41%

31%

25%

J]khgf\]flk af\a[Yl] Y ka_fa[Yfl k`a^l af k]flae]fl gf Ykk]l hja[]k& Lo]flq%k]n]f h]j[]fl g^ j]khgf\]flk fgo Z]da]n] \]Yd hja[]k oadd \][j]Yk]$ mh ^jge ). Y q]Yj Y_g& Ka_fa[Yfldq egj] j]khgf\]flk ]ph][l E9 Ykk]l nYdm]k lg \][j]Yk] ^jge Y q]Yj Y_g$ hgl]flaYddq kdgoaf_ l`] hY[] g^ \]Ydk Yk Zmq]jk hYmk] af anticipation of falling asset prices.

Oct-10

Apr-11

Oct-11

Apr-12

Oct-12

9egf_ l`gk] [gehYfa]k l`Yl \g ]ph][l lg ]f_Y_] af E9$ \]Yd kar]k j]eYaf keYdd$ j]][laf_ Yf gf_gaf_ Yn]jkagf lg jakcq$ ljYfk^gjeYlagfYd ljYfkY[lagfk& Egj] l`Yf 0( kYq l`Yl l`]q oadd \g \]Ydk ogjl` d]kk l`Yf MK-((e$ Yf\ +0 kYq l`]q oadd \g \]Ydk mf\]j MK-(e& L`ak km__]klk l`Yl$ o`]j] \]Ydk Yj] Z]af_ [gfka\]j]\$ l`]q oadd ]pl]f\ ]paklaf_ Zmkaf]kk]k Yf\ dd strategic gaps.

34%

af af\mkljaYd hjg\m[lk$ +* af fYf[aYd services, 28% in oil and gas and 28% in consumer products expect to pursue acquisitions in the next 12 months

What do you expect the price/valuation of M&A assets to do over the next 12 months?
31%

28%

Increase

with revenues of US$5b or greater expect to pursue an acquisition in the next 12 months
Remain at current levels

41% 27% 42% 41% 57% 27%

Decrease

18% 16%

Q Oct-12 Q Apr-12 Q Oct-11

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Where will the deals be done?

Top investment destinations, according to our respondents span developed and emerging markets, as companies seek lg af[j]Yk] l`]aj ]phgkmj] lg eYjc]lk l`Yl g^^]j Z]ll]j _jgol` opportunities. There is increasing evidence that developed markets are regaining momentum as top investment destinations. >gmj g^ l`] lgh n] \]klafYlagfk ^gj [gehYfa]k eYcaf_ afn]kle]flk Yj] mf[`Yf_]\ ^jge 9hjad$ oal` ^l`%hdY[] ?]jeYfq replacing Indonesia. While China remains a top investment destination, completing deals there remains challenging.

Top investment destinations )& ;`afY *& MK +& Af\aY ,& :jYrad -& ?]jeYfq

AfZgmf\ afn]klgjk aflg lgh n] afn]kle]fl \]klafYlagfk

Top inbound investors 1. US 2. UK 3. France 4. Brazil 5. Turkey

Germany US
Top inbound investors 1. UK 2. Singapore 3. Germany 4. Canada 5. China

China India
Top inbound investors 1. US 2. Singapore 3. Italy 4. Brazil 5. UK

Brazil

Top inbound investors 1. US 2. Italy 3. UK 4. Singapore 5. Colombia

Top inbound investors 1. US 2. Germany 3. Japan 4. Italy 5. Brazil

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Fewer divestments expected after period of high activity

There has been a sharp decline in the number of companies hdYffaf_ lg eYc] \an]kle]flk af l`] f]pl )* egfl`k$ ^jge +) af 9hjad lg )1 lg\Yq& EYfq [gehYfa]k `Yn] _gf] l`jgm_` l`] hjg[]kk g^ ghlaearaf_ l`]aj hgjl^gdagk Yf\ g^gY\af_ l`gk] Ykk]lk l`Yl \a\ fgl l l`]aj gn]jYdd kljYl]_a[ gZb][lan]k& L`ak eYq af\a[Yl] Y k`a^l ^jge Y \an]kle]fl h`Yk] lg Y performance-optimization phase. Is your company likely to make an asset sale/divestment in the next 12 months?  kYqaf_ q]k
31%

Optimization moves to the forefront

>gddgoaf_ Yf Y[lan] h]jag\ g^ \an]kle]fl Y[lanalq gn]j l`] hYkl )0 egfl`k$ [gehYfa]k `Yn] fgo k`a^l]\ l`]aj ^g[mk lg optimizing capital allocation and improving performance.

Na]ohgafl
:gYj\jgge Y_]f\Y \jan]f Zq [YhalYd ghlaearYlagf
Kaf[] l`] gfk]l g^ l`] fYf[aYd [jakak$ l`] [gfl]fl g^ ZgYj\jgge \ak[mkkagfk `Yk Z]]f ljYfk^gje]\& >an] q]Yjk Y_g$ lgha[k km[` Yk ]^[a]f[q Yf\ [gkl [gfljgd c]q ]d]e]flk g^ [YhalYd ghlaearYlagf ogmd\ jYj]dq `Yn] eY\] l`] ZgYj\jgge Y_]f\Y Yf\ ogmd\ `Yn] Z]]f [gfka\]j]\ akkm]k ^gj gh]jYlagfYd eYfY_]e]fl& Lg\Yq$ `go]n]j$ l`]k] Y[lanala]k Yj] [jm[aYd \jan]jk g^ nYdm] [j]Ylagf$ hYjla[mdYjdq Yl Y lae] o`]f lgh%daf] _jgol` j]eYafk ]dmkan] af egkl \]n]dgh]\ eYjc]lk& 9\\alagfYddq$ egj] l`Yf `Yd^ g^ j]khgf\]flk kYq l`Yl ghlaearaf_ [YhalYd Yddg[Ylagf `Yk egn]\ mh l`] ZgYj\jgge Y_]f\Y$ Yk k`Yj]`gd\]jk \]eYf\ l`Yl ZgYj\k \aj][l [YhalYd lgoYj\ l`] egkl hjgeakaf_ afn]kle]flk Yf\ eYpaear] j]lmjfk&

0%
26%

5%
21%

0% 5% Oct-10

20% 19%

Apr-11

Oct-11

Apr-12

Oct-12

Top sectors planning to divest )& >afYf[aYd k]jna[]k *& Af\mkljaYd hjg\m[lk +& L][`fgdg_q ,& ;gfkme]j hjg\m[lk -& 9mlgeglan]

How do you think the boardroom agenda at your company `Yk [`Yf_]\ kaf[] l`] gfk]l g^ l`] fYf[aYd [jakak7
=^[a]f[q Yf\ [gkl [gfljgd Jakc eYfY_]e]fl ;YhalYd Yddg[Ylagf ?jgol` affgnYlagf J< J]_mdYlgjq akkm]k

71% 64% 52% 49% 47% 42% 41% 35% 40%

25% 29% 41% 36% 43% 42% 46%

4% 7% 7% 15% 10% 16% 13% 25%

What are the main drivers of your companys planned divestment activity? (Select two)
51%
Focusing on core assets

56% 48% 30%

H]ghd] YlljY[laf_' j]lYafaf_ lYd]fl! Afn]klgj j]dYlagfk

Enhancing shareholder value

25% 28% 22%

Shedding underperforming business unit

17% 32% 19%

?jgol` afn]klaf_ af f]o eYjc]lk

?j]Yl]j ^g[mk lg\Yq KlYq]\ l`] kYe]

D]kk ^g[mk lg\Yq

Funding inorganic/M&A growth plans

17% 20% 18% 23% 19%

Raising cash to compensate for underperformance of aggregate business

Oct-12 Apr-12 Oct-11

)(

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Kmjn]q \]eg_jYh`a[k
Proportions of select industries represented What are your companys annual global revenues in US$?
$5b or more ;gfkme]j hjg\m[lk 9mlgeglan] Oil and gas Da^] k[a]f[]k" $1b to $4.9b $500m to $999.9m Less than $500m

24% 35% 23% 18%

Hgo]j Yf\ mladala]k >afYf[aYd k]jna[]k L][`fgdg_q Mining and metals <an]jka]\ af\mkljaYd hjg\m[lk HmZda[ k][lgj

What is your position in the organization?

C-level executive Head of BU/dept. SVP/VP/director

49% 27% 24%

What best describes your company ownership?

Publicly listed Privately owned Family-owned Government/ state-owned enterprise Private equity portfolio company

60% 28% 5% 4% 3%

*Health care/provider care, pharma, biotech

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A^ qgm ogmd\ dac] lg \ak[mkk l`] [gehj]`]fkan] kmjn]q j]kmdlk gj l`gk] kh][a[ lg qgmj k][lgj gj _]g_jYh`q$ hd]Yk] [gflY[l qgmj =jfkl  Qgmf_ Y\nakgj gj Yfq g^ l`] [gflY[lk Z]dgo&
Name Global Pip McCrostie Global Vice Chair LjYfkY[lagf 9\nakgjq K]jna[]k Steven Krouskos ?dgZYd Yf\ 9e]ja[Yk EYjc]lk D]Y\]j LjYfkY[lagf 9\nakgjq K]jna[]k Michael Rogers ?dgZYd EYjc]lk LjYfkY[lagf 9\nakgjq K]jna[]k Americas Richard M. Jeanneret 9e]ja[Yk D]Y\]j LjYfkY[lagf 9\nakgjq K]jna[]k Europe, Middle East, India and Africa (EMEIA) Joachim Spill =E=A9 D]Y\]j LjYfkY[lagf 9\nakgjq K]jna[]k 9kaY%HY[a[ Yf\ BYhYf John Hope 9kaY%HY[a[ D]Y\]j LjYfkY[lagf 9\nakgjq K]jna[]k Kenneth G. Smith BYhYf D]Y\]j LjYfkY[lagf 9\nakgjq K]jna[]k +852 2846 9997 john.hope@hk.ey.com +49 6196 996 25366 joachim.spill@de.ey.com +1 212 773 2922 richard.jeanneret@ey.com +44 20 7980 0500 pip.mccrostie@uk.ey.com Telephone Email

Ernst & Young Assurance | Tax | Transactions | Advisory

About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit www.ey.com. About Ernst & Youngs Transaction Advisory Services How an organization manages its capital agenda today will define its competitive position tomorrow. We work with our clients to help them make better and more informed decisions about how they strategically manage capital and transactions in a changing world. Whether youre preserving, optimizing, raising or investing capital, Ernst & Youngs Transaction Advisory Services brings together a unique combination of skills, insight and experience to deliver tailored advice attuned to your needs helping you drive competitive advantage and increased shareholder returns, through improved decision-making across all aspects of your capital agenda. About this survey Ernst & Youngs Capital Confidence Barometer is part of Growing Beyond, our flagship program exploring how companies are finding new opportunities in challenging economic times. 2012 EYGM Limited. All Rights Reserved. EYG no. DE0361 +81 3 4582 6400 kenneth.smith@jp.ey.com
This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor. The opinions of third parties set out in this publication are not necessarily the opinions of the global Ernst & Young organization or its member firms. Moreover, they should be viewed in the context of the time they were expressed.

+1 212 773 3975

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+44 20 7980 0200

michael.rogers@ey.com

Acknowledgements
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