Interview
Evolving Corporate Sentiment in Europe
- Chief executives are shifting focus to "growth mode" prioritizing immediate-term expansion alongside daily management, driven by a recent increase in strategic confidence.
- Strategic planning now incorporates assumptions regarding vaccine timing, the pace of consumer recovery, and the tapering of government fiscal support schemes.
- Stabilization in infection rates in Europe is expected to trigger a noticeable pickup in M&A activity and all-equity transactions in the fall and for the remainder of the year.
- Accelerated corporate simplification through sales and spinoffs is anticipated to clarify strategy, with a likelihood that non-core assets will transfer to private equity.
- Leaders are increasingly engaged in scenario planning centered on geopolitical risks, including US-China relations, the Brexit deadline, Eurozone financial issues, emerging market supply chains, and the US presidential election.
- Strategic deliberations focus on determining optimal balance sheet structures for a post-COVID environment, addressing dividend policies, leverage, and capital allocation within a low to negative interest rate landscape.
- Return-to-office strategies are being prioritized to nurture R&D, innovation, and corporate culture within remote work frameworks.
- Greater government intervention in transactions is expected in sectors of national importance such as healthcare, aerospace, defense, and technology.
- Business leaders are expected to articulate positions on social and political issues, including racial equity and specific corporate boycotts, to maintain a social license to operate.
- Europe is projected to remain at the cutting edge of ESG trends, with assets under management rising from a current 7% to 8% range and significant market inflows exceeding $125 to $130 billion over the last 18 months.
- The European growth composition is expected to shift away from oil, gas, and financial institutions toward technology and healthcare over the next 12 to 24 months, driven by the significant outperformance of renewables and clean energy.
- A more unified ESG rating scorecard similar to credit agency methodologies is anticipated to emerge in the near future.