Last week, the National Center for the Middle Market (“NCMM”) released their quarterly data from NCMM’s periodic survey of 1,000 CEOs, CFOs, and other C-suite executives in the middle market (Revenues $10MM – $1B). The results offer some interesting conclusions.
- Middle market firms grew at a 6.9% rate in 2016, with PE-owned firms growing at a
- 10.0% rate. This compares to a 4.4% rate for companies in the S&P composite.
- On average, middle market executives expect 2017 growth to be in the 5.5% range.
- 65% of those executives surveyed expect to invest in their businesses this year:
o 42% of respondents expect to introduce a new product or service.
o 41% expect to expand their markets.
- 25% expect to make an acquisition, and 25% expect to add a new plant.
Across the market, NCMM reports that 21% of their respondents expect to take on more debt to finance their growth activities. We believe these respondents to be representative of smaller middle market businesses who do not enjoy the luxury of an ample asset base to support growth, including cash reserves.
These smaller middle market businesses experience high growth rates requiring more capital than is available at the corner bank. More creative financing structures may be required to support lower middle market companies’ strategies. Alternative sources of capital continue to be plentiful for qualified companies.