Daily News: September 13, 2012

KPMG Survey: Mid-Market Companies Say Cash, Revenue Up

Middle-market business executives say their companies have more cash, are adding employees and enjoying stronger revenue, but they remain quite guarded longer term, not seeing a complete economic recovery until 2014 or later, according to the 2012 Mid-Market Outlook Survey by KPMG.

In KPMG’s 2012 Mid-Market Outlook Survey, 62% of executives indicate that their companies have significant cash on the balance sheet – up from 60% in KPMG’s 2011 survey – and 50% say their companies’ cash positions have increased from last year. Furthermore, 58% say revenues are up from prior year, and 46% say they have increased the number of U.S. employees. Interestingly, 23% indicate that their company’s headcount has returned to pre-recession levels.

“The middle market sector has experienced some positive momentum in the past year, but executive leaders aren’t about to throw caution to the wind,” said Jerry Jolly, KPMG partner and leader of the firm’s national Mid-Market practice. “In this year’s survey, executives express concerns over pricing, regulatory and legislative pressures and lack of consumer demand as significant growth barriers, and have pushed back their estimated timeline for economic recovery to 2014 or later.”

In fact, when asked about their expectations for the U.S. economy a year from now, 70% anticipate improvement, up from 60% in the 2011 survey. Additionally, 58% of the executives don’t expect substantial economic recovery until 2014-2015 or later – as opposed to 75% who, in the 2011 KPMG survey, predicted the recovery would be complete by the end of 2013. While 61% of the executives plan to add headcount in the next year, the increases are planned to be modest and, consistent with last year’s survey, 15% do not expect their company’s headcount to ever return to pre-recession levels.

While waiting for the recovery to take the hold, 60% plan to increase capital spending over the next year. The highest priority investment area is information technology, cited by 43% of the executives in the KPMG survey. Other significant areas of investment for mid-market companies are new products or services (39%), acquisition of a business (34%). Supporting the investment in acquisition findings, more than half of the executives (59%) say their companies will likely be involved in a merger/acquisition in the next two years.

“Companies can’t wait for the economy to bounce back in order to fuel growth – both organic and inorganic – and will be investing into key areas such as technology, new products and services, and potential acquisitions,” added KPMG’s Jolly.

Other notable areas for investment include increased spending on geographic expansion (22%), expanding facilities (20%) and advertising and marketing (19%).

The KPMG survey was conducted in May 2012 and reflects the responses of 388 senior executives in companies with annual revenues in the $100 million to $1 billion range. Executives surveyed spanned 11 industry sectors, including aerospace & defense, automotive, banking, commercial real estate, food & beverage, insurance, investment management, media & telecom, pharmaceuticals, retail and technology.