- Middle-market executives bullish on 2019 growth ambitions
- Middle-market executives turn to M&A to accelerate growth and tackle disruption
- Technology investment still key to improving middle-market agility and resilience
LONDON, April 18, 2019 /PRNewswire/ -- Despite forecasts of economic headwinds ahead and increasing geopolitical uncertainties, many middle-market companies are still bullish about their growth prospects, according to the 20th edition of the EY Global Capital Confidence Barometer (CCB), a biannual survey of more than 2,900 executives across 47 countries.
Fifty-eight percent of middle-market executives surveyed said that their companies expect double-digit growth in 2019 – more than double the percentage in 2018 (27%), with 91% expecting global and domestic economic growth to increase over the next 12 months and 83% confident about corporate earnings, short-term market stability and credit availability.
Smaller middle-market companies (between US$100m and US$250m in revenues) display even higher levels of confidence, with 71% anticipating double-digit growth and 42% of those expecting growth rates of 16% or more over the coming year. In contrast, for the biggest middle-market segment (US$1b-US$3b in revenues), the numbers are 52% and 12%, respectively.
However, for all their confidence in growth opportunities in 2019, middle-market executives acknowledge that there are also risks. While the percentage of middle-market executives concerned about a slowdown in economic activity impacting their growth plans has dropped (from 42% in 2018 to 33% in 2019), executives still see it as a top priority risk, followed by geopolitical risk (19%) and supply chain disruption (19%).
Geographically, confidence has shifted westwards in the past year, with 80% of US-based and 57% of European-based middle-market companies expecting double-digit growth over the next 12 months. Where Asia-Pacific led the way for growth opportunities in 2018, only 39% of middle-market executives in the region have double-digit growth expectations for 2019.
Ryan Burke, EY Global Growth Markets Leader, says:
"Against a backdrop of ongoing geopolitical tensions, trade issues among the US, China and Europe, as well as uncertainty as to how the UK will leave the European Union, middle-market executives remain hugely optimistic in their growth outlook and are taking advantage of ongoing global and local economic growth as well as strong macroeconomic fundamentals. Middle market companies see strong opportunities in leveraging M&A, and the use of technology to gain a competitive edge."
M&A appetite is strong among middle-market executives
The appetite for global mergers and acquisitions (M&A) is strong, with 47% of middle-market executives expecting their companies to pursue M&A over the next 12 months, and 90% anticipate that the M&A market will improve during the same timeframe.
The UK remains a significant investment destination for middle-market executives, despite its intention to leave the European Union, and ranks second globally behind only the US. The remaining top five investment destinations of choice for middle-market executives are Germany, China and France.
In terms of sector focus, technology companies (54%) have the biggest appetite for deal making, followed by telecommunications (49%) and industrials (49%).
Technology investment still key to middle-market growth ambitions
To improve their agility and resilience against risks that could negatively impact their growth plans, almost all middle-market companies (97%) indicate that they are planning significant investments in technology in the year ahead.
The past two years have seen been a dramatic shift in attitudes towards new technology. In 2017, 74% of middle-market executives said they would never adopt robotic process automation. However, in 2018, 73% of executives said they were already adopting or planning to adopt artificial intelligence (AI) within two years. This year, 71% say they are planning to develop and deploy AI in-house.
The emphasis on technology investment is spread across multiple priorities — creating new products and services, improving internal efficiencies, enhancing the customer experience and improving data access and analysis. However, risk reduction (including cybersecurity) is a stand-out priority for investment. In 2018, only 7% of middle-market executives said they would be investing in technology that reduced risks, while this year that percentage has more than doubled, with 19% now looking to invest in technologies that can help them manage and mitigate risk.
"Looking ahead, we anticipate that middle-market executives will focus on achieving their ambitious growth plans through a combination of seizing fast-growth opportunities through M&A, and strengthening financial discipline, managing their supply chains and implementing AI. In finding the right balance between growth and investment, middle-market companies can achieve growth, improve agility and build resilience while navigating the uncertain times ahead."
Notes to Editors
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation is available via ey.com/privacy. For more information about our organization, please visit ey.com.
About EY Growth Markets Network
The EY worldwide Growth Markets Network is dedicated to serving the changing needs of high-growth companies. For more than 30 years, we've helped many of the world's most dynamic and ambitious companies grow into market leaders. Whether working with international, mid-cap companies or early stage, venture-backed businesses, our professionals draw upon their extensive experience, insight and global resources to help your business succeed.
About EY Global Capital Confidence Barometer
EY Global Capital Confidence Barometer is a biannual survey compiled by Euromoney Institutional Investor Thought Leadership of more than 2,900 senior executives from large companies around the world and across industry sectors. This is the 20th biannual CCB in the series, which began in November 2009; respondents for the 20th edition were surveyed in February and March 2019. Respondents represented 14 sectors, including financial services, consumer products and retail, technology, life sciences, automotive and transportation, oil and gas, power and utilities, mining and metals, diversified industrial products, and construction and real estate. The objective of the Global Capital Confidence Barometer is to gauge corporate confidence in the global and domestic economic outlook, to understand boardroom priorities in the next 12 months and to identify emerging capital practices that will distinguish those companies building competitive advantage as the global economy continues to evolve. ey.com/ccb #EYCCB
EY Global Media Relations
+44 (0) 207 951 8993