Mergers and acquisitions in Australia and New Zealand are tipped to explode as global volatility spurs the need for companies to aggressively pursue growth, a senior executive survey has found. 
Professional services firm EY's six-month Australasia Capital Confidence Barometer, which surveys more than 1600 senior executives globally, including 144 in Australia and New Zealand, found more than half of Australian companies are planning acquisitions in the next 12 months, up from 44 per cent six months ago.
"We are seeing an uptick in confidence with the increase in companies planning acquisitions but also the value that's being derived from acquisitions," EY Oceania managing partner Julie Hood told Fairfax Media before the report's release. Volatility in commodity and currency markets was the dominant emerging theme in boardroom discussions, the survey found.
"Corporates are realising that in order to continue to grow, with all the volatility dynamics, that M&A is one mechanism to do that," Ms Hood said.
Equity markets appear to be fully priced on corporate earnings expectations, according to the report. Globally, 74 per cent of executives expected equity valuations to remain stable, compared with 64 per cent in Australia and New Zealand.
"This contrasts dramatically with expectations of six months ago, when 69 per cent and 86 per cent of executives were anticipating equity value improvements at the local and global level respectively," the report says.
The need for growth was reflected in the number of companies with three or more deals in the M&A pipeline. At 83 per cent, the number has skyrocketed compared with six months ago when it was just 25 per cent.
"While we see a significant uptake, we're still below globally with the percentage of deals," Ms Hood said.
Despite some high-profile M&A activity in Australia, including Woodside Petroleum's bid for Oil Search and the Qube and Brookfield battle for Asciano, 90 per cent of the deals surveyed by EY were "bolt-on" acquisitions of less than $US250 million ($355 million). The sectors in which deals are increasing have also shifted, according to the report. Deals are being desired in food services as Australia cements its Asian food-bowl status. Consumer retail and life sciences are also in favour, bucking the global trend, which is still towards mining and oil-gas deals.
Also, most deals were being pursued within developed markets as concerns over the state of emerging market economies, which have been under pressure from a stronger US dollar and China's economic slowdown, are leading executives to spurn the risk.
The results come after Credit Suisse analysed 20 years of M&A deals in Australia and found that on average, the share price of acquiring companies tended to underperform 1 per cent or more compared with the market in the first 12 months after announcing the deal. Previous research found Australian companies were poor at making big investments in their own business, but now they were bad at making acquisitions as well, Credit Suisse equity strategist Hasan Tevfik said.
"Perhaps the most efficient form of capital allocation for Australia Inc is to give money back to the shareholder and not to risk the value destruction that comes from spending it," he said.