Daily News: August 1, 2012

CIT: Mid-Market Execs Anticipate Capital Goods Acquisitions


More than three-quarters of U.S. middle-market executives said their companies will make at least one capital goods acquisition of significant value over the next six to 18 months, according to Vince Belcastro, managing director and group head of CIT Capital Equipment Finance for CIT Group.

This is one of the key findings detailed in “A Rising Demand for Capital Goods,” the latest CIT executive vodcast featured in the CIT Executive Insights Series

The video is the second of a two-part series that takes a closer look at CIT’s recent study: “U.S. Capital Goods and Equipment Financing Outlook: A Focus on Essential Acquisitions.”

Desire for Increased Efficiencies Driving Demand

Over the coming months middle market executives are looking at their platforms and planning some form of capital investment. “Demand for capital goods is being driven by aging fleets and the desire for increased efficiencies, especially in the transportation industries,” said Belcastro. “The need to improve technology, and customer-specific applications and demands, requires investment in new machinery and technology to produce those goods and services.”

Sufficient Financing Facilitates Capital Asset Purchases

Companies that purchased one significant capital asset in the past year did so for a number of reasons. “More than half said the most common driver was having sufficient financing in place, while more than a third said the business need was simply too strong to delay. Additionally, 31% said that business opportunities required new equipment,” said Belcastro.

Careful Consideration Taken When Acquiring Capital Goods

When reviewing capital asset acquisitions, middle market executives consider many factors. Belcastro commented, “Executives will often consider the availability of reasonable pricing for that asset, as well as the lease versus buy option and how that decision will affect cash flow, and if there are tax advantages.”

Positive Outlook for the Equipment Financing Market

“According to our survey, the outlook for the equipment financing market is positive,” said Belcastro. “I believe financial institutions have come up with flexible structures and pricing to address consumer and industrial demand for the assets they are looking to finance and acquire.”