According to the latest EY CEO Outlook Pulse survey, global CEOs are optimistic about their ability to drive revenue growth and profitability in 2024 despite acknowledging the prevailing global economic headwinds.
The survey of 1,200 CEOs across 21 countries revealed that a significant majority (64 percent) of respondents anticipate an increase in revenue growth, while 63 percent expect improved profitability. EY said CEOs have a “newfound resilience and confidence” focused on efficiency enhancements, cost management, and technology adoption, particularly artificial intelligence (AI).
The survey also highlights expectations of an uptick in M&A megadeals, with 79 percent of CEOs anticipating increased activity.
While geopolitical risks are a concern, CEOs are actively integrating them into their decision-making process. Their optimism and proactive approach signal a year of action and transformation in 2024, navigating a volatile global landscape with agility and pragmatism.
This optimism comes despite acknowledging the continued challenging macroeconomic environment, with three-quarters (76 percent) of CEOs surveyed expecting the global economy to continue to endure low or no growth. EY indicated that 78 percent are preparing for interest rates to stay “higher for longer” due to ongoing inflationary pressures, and over one-half (57 percent) are forecasting an increase in the cost of business.
“Even though CEOs expect continued stagnation of the global economy, this has not dampened their drive for profitability,” offered Andrea Guerzoni, EY global vice chair of strategy and transactions. “Exhibiting a newfound resilience and confidence, CEOs are on the hunt for opportunities to drive efficiencies and transform their business for growth. Anticipating an upswing in the M&A market now showing signs of recovery, many are now meaningfully revisiting their business transformation plans, scanning for smart investments and laying the groundwork for potential alliances.”
Lift-off for deals market in 2024
EY said in its survey summary that CEOs anticipate a deals market bounce-back, with nearly eight in 10 (79 percent) respondents forecasting an uptick in M&A megadeals above $10 billion. Thirty-six percent of respondents are also actively pursuing M&A transactions over the next 12 months, and a further 29 percent are seeking divestments, according to the survey results.
The U.S. maintained its position as the most attractive target region regarding M&A activity, followed by Japan, the UK, China, and India. Manufacturing was identified as the top sector for M&A deals, closely followed by Banking and Capital Markets, Insurance, Consumer Products and Mobility rounding up the top five.
This quarter’s survey also captured the perspectives of 300 private equity leaders across more than 20 countries regarding their investment and portfolio management outlook. Mirroring CEO sentiment, the majority surveyed PE (71 percent) also forecasted an uptick in megadeals. Seventy percent of surveyed PE leaders forecasted an increase in corporate divestment or carve-out activity in 2024, signifying a more buoyant deals market than in the previous year.
Transformation plans to speed up focused on efficiencies
Underpinning the rise in CEO confidence is a rush toward strategic transformation, with EY pointing out that 58 percent of CEOs surveyed are accelerating their business transformation agendas, almost tripling them from 21 percent tallied in July 2023. In stark contrast, EY said only 5 percent report having no transformation plans, a sharp improvement from the 37 percent with no plans in July 2023. Nevertheless, despite the bullish sentiment, EY said CEOs in its survey are demonstrating pragmatism in their approach to business transformation.
“Primary focus areas include efficiency enhancements and cost management strategies,” the report summary read. “Namely, 42 percent of CEOs and 45 percent of private equity leaders surveyed are prioritizing effectively managing their working capital. CEOs are also embracing technology as an efficient driver, with 41 percent looking to adopt artificial intelligence to drive efficiency and bolster business performance. Interestingly, while surveyed CEOs embrace AI to deliver efficiencies, three in four (76 percent) agree the technology will have little impact on revenue growth.”
Guerzoni added, “If 2023 was the year of transition as organizations grappled with a ‘poly-crisis,’ 2024 is shaping up to be the year of action. With an acceptance that the costs of doing business are unlikely to fall to pre-pandemic levels, we’re seeing a shift in how CEOs approach business transformation, balancing optimism with pragmatism and focusing on efficiency and cost management.”
Geopolitical risks take center stage in a bumper year for elections
With over one-half of the world’s population going to the voting booth over the next 12 months, EY said CEOs are acutely aware of geopolitical risks and the potential business impact.
“Over three-quarters of those surveyed (78 percent) are worried about the potential rise of populist movements to increase geopolitical uncertainty and create business challenges,” EY highlighted. “Seventy-six percent of respondents were also concerned about the political misuse of AI in major 2024 elections.”
While EY suggested that many CEOs feel confident about their organization’s ability to integrate geopolitical turbulence into their decision-making, nearly one-half (48 percent) of respondents reportedly believe there is room for improvement in their defined and active processes for managing geopolitical risks. EY said 98 percent of CEOs and PE leaders surveyed are having to alter their investment plans, including exiting certain businesses (32 percent of CEO respondents and 38 percent of PE respondents) or delaying a planned investment (42 percent of CEO respondents and 32 percent of PE respondents).
“The influence of the political world on the corporate world is as strong as ever, but this year, we’re seeing another risk emerge— the rise of AI in political campaigning and the potential for its misuse,” Guerzoni observed. “CEOs are well aware of the need to integrate geopolitical turbulence into their strategic plans. But with many still unsure about their risk management processes, now is the time to revisit and refine strategies to navigate through a volatile geopolitical landscape.”
To access the full report, go here.
