Middle market executives are more confident about future growth and are actively pursuing multi-faceted growth strategies in the coming year. These are some of the observations from Jeff Kilrea, group head and managing director of CIT Sponsor Finance in “Middle Market Economic Outlook,” the latest piece of market intelligence in the CIT Executive Insights video series.
“Middle market executives indicated they expect to see a lot of geographic expansion in 2017,” Kilrea said. “Alternatively, we anticipate that we will see these companies look at other ways to deploy capital, i.e. via new technologies and digital strategies, as well as new product line extensions. Businesses are also forecasting greater investments in marketing/advertising and the workforce.”
Results from the annual CIT Voice of the Middle Market survey indicate that middle market executives expect federal interest rates will begin to rise. However, despite this, signs point to an ample supply of capital for the middle market in 2017.
When asked about the prevalence of M&A versus private equity investment in 2017, Kilrea said, “Acquisitions are just as probable as investment in organic strategies. Private equity fund managers see growth potential consistent with the middle market owners and leaders. We expect private equity to look at select opportunities in energy and energy-related services as oil prices stabilize. We also expect the healthcare and technology sectors to be of interest for PE firms. Private equity capital will continue to fuel sector growth in 2017. However, the frothy deal environment may be a precursor to a future downturn.”
Kilrea also pointed out that optimism is dampened somewhat by concerns over obstacles, including data security, changes in the healthcare system, uncertainty in tax policies, global terrorism and cyber threats.
There is also the “known unknown” in this post-election year: How will federal policies affect American business? However, he believes that business leaders are being proactive should there be dramatic changes in the tax regulation and/or governmental spending declines.
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