Capital Confidence Barometer, October 2013
Growth strategies — investment intent tops capital agenda
Focus on growth is at two-year high
Over the next 12 months, growth is the primary focus for almost 60% of companies. Continued operational efficiency and cost control measures have largely eliminated concerns about stability and survival.
Q: Which statement best describes your organization’s focus over the next 12 months?
Excess cash is used to pay down debt and fund growth
In the near term, 36% of companies will use excess cash to pay down debt, which is one of the remaining ways to optimize their capital structure. And 48% of companies plan to use excess cash to fund growth — starting with lower-risk organic strategies. As companies find organic strategies no longer sufficient to achieve desired growth rates, they may look to M&A.
Organic growth strategies will center on core products and existing markets
To address their need for growth, companies will initially focus on lower risk organic platforms: existing products, channels and markets. This strategy allows them to pursue low risk growth while maintaining financial discipline and governance objectives. As they exhaust those lower-risk organic options, companies will pursue higher-risk organic strategies: new products, channels and geographies.
Growth is now a global imperative, as almost 60% of executives say they plan to accelerate their growth strategies over the next 12 months.
Companies have weathered a prolonged period of uncertainty. During this time, they have strengthened their balance sheets and largely optimized their capital structures.
Companies are now ready to capitalize on the improving global economy and credit markets to implement their growth agendas. Growth strategies are shifting from organic to inorganic strategies. Coupled with positive leading indicators, the greater focus on growth points to a return of increased M&A activity deals, globally.