6 minute read 25 May 2021
EY - Post-covid-19-era-background

How private companies are refitting strategy for a post-Covid-19 economy

Authors
Lee Henderson

Americas EY Private Leader; Executive Sponsor, EY Entrepreneurs Access Network

Fervent supporter of young entrepreneurs and their businesses. Connector of the entrepreneurial ecosystem. Self-proclaimed sports fanatic.

Jeff Leach

EY Americas Business Development Leader, Strategy and Transactions

Strategy and M&A advisor, delivering topline growth and bottom-line results. Dad to twins. Yogi, runner, advocate for the ethical treatment of animals.

6 minute read 25 May 2021

Looking to act fast to take advantage of opportunities, US private companies are using M&A to reimagine their corporate strategy.

In brief:

  • As US private companies shift from surviving to thriving, they are hyper-focused on reimagining a strategy fit for the real world.
  • People are a top priority for US private company executives, as they seek to align their talent to new business models and improve the customer journey.
  • US private companies plan to use M&A to make bold moves.

In the US, the COVID-19 pandemic hit private companies hard and fast. According to the latest EY Global Capital Confidence Barometer, 95% of US private companies experienced a significant decline in revenue and profitability as a direct result of the pandemic.

But as fast as revenues declined, 80% of private company executives expect a rapid rebound to pre-pandemic levels by the end of this year. Executives admit that profitability may take a little bit longer, but 89% believe pre-pandemic profit levels are achievable by 2022 at the latest.

Macroeconomic outlook

80%

of US private company respondents expect to see revenues return to pre-pandemic levels in 2021

Although they felt the impact, overall, US private companies are satisfied with their pandemic-response performance relative to their competitors, with 85% saying they overperformed in digital transformation, while 41% believe they exceled in workforce management.

Yet, as confident as they are in their ability to survive, these companies know they need to do more to truly thrive in the post-pandemic real world. To that end, based on the lessons they’ve learned, we see five key areas where US private companies need to focus their corporate strategy and investments to thrive in the months and years ahead.

1. Make your strategy fit for the post-pandemic real world 

Although US private companies believe they overperformed in several areas at the outset of the pandemic, 60% of executives believe they underperformed in terms of operational stability, while 41% were dissatisfied with their financial performance. Most private companies struggled to forecast demand for products — something that continues to be a challenge through the recovery.

Pandemic performance

60%

of US private company respondents believe they underperformed relative to their competitors in operational stability

As a result, US private companies are hyper-focused on and disciplined about corporate strategy. Ninety-three percent of executives say they conducted a comprehensive strategic and portfolio review in 2020, with more than half saying their review was accelerated because of the pandemic.

US private companies now know they need to plan for the unexpected. In doing so, they’ve prioritized identifying potential areas of growth through M&A, transforming their operating model and investing in technology and digital capabilities as their top three strategic considerations. They’re reimagining every aspect of their business to ensure that their strategy is fit for a post-pandemic world.

US private companies have prioritized identifying potential areas of growth through M&A, transforming their operating model and investing in technology and digital capabilities as their top three strategic considerations.

2. Build-out your ecosystems beyond the usual suspects

In a recent EY-Parthenon survey, 67% of respondents say their biggest competitive threat will come from a non-traditional competitor. Understanding who the true competitors are and comparing that against which industry boundaries may be under threat can help US private companies decide areas for growth, identify opportunities to partner or determine acquisition targets. Sometimes, it may even highlight ways for direct competitors to work together. In the EY Global Capital Confidence Barometer, 85% of US private company executives say they need to do a better job of defining their future role in the ecosystem, 79% admit that their ecosystem will be strongly influenced by new entrants, while an equal percentage say they are open to partnering with the competition to create new ecosystem solutions. Eighty-four percent of executives also acknowledge that they’ll need to build new skills and processes to operate effectively in an ecosystem environment going forward.

3. Look after your talent, otherwise, someone else will 

Pre-pandemic, getting to a consistent customer experience across all channels and touchpoints was US private companies’ No. 1 priority. Today, their No. 1 priority is their people. Although roughly 4 in 10 US private company executives say they overperformed relative to their competitors in the area of workforce management, they acknowledge they can do better. Three-quarters say they will be increasing their strategic focus and investment on workforce management — a significantly higher proportion than global executives (52%).

Pandemic impact on workforce

75%

of US private company respondents say they will be increasing their strategic focus and investment on workforce management

Specifically, according to EY 7 Drivers of Growth research findings, US private companies are looking to do more to align resource requirements with future business objectives, which will be driven by renewed business models, and doing a better job of embedding the organization’s people plan within corporate strategy and integrating a culture of continuous feedback. Currently, according to the EY Global Capital Confidence Barometer survey results, US private company executives acknowledge that employee engagement and internal inertia are among the top internal challenges they face in implementing their company’s strategy.

4. Understand your future consumer and what’s important to them 

Although the No. 1 priority may have shifted from customers to employees, customers still rank No. 2 on the EY 7 Drivers of Growth list. In a recent EY-Parthenon survey, 85% of respondents say customers are as important, or more important, than shareholders when formulating strategy, and 69% say the same for employees relative to shareholders. This is reflected in our EY Global Capital Confidence Barometer survey results, where more than three-quarters (76%) of executives say they are increasing their investment in customer engagement. Further, for 39% of US private company executives the customer is front and center in strategic actions currently underway to improve the growth of their company: 

  • Attracting and retaining customers using technology to expand existing products and services 
  • Investing in accelerating the digitization of customer journeys and business processes
  • Attracting and retaining customers for existing and developing new products and services

Increasing customer engagement

76%

of US private company respondents say they are increasing their investment in customer engagement

5. Make the bold moves; don’t sit on the M&A sidelines 

With 57% saying they expect their company to actively pursue M&A in the next 12 months, US private company executives are more bullish than their global peers at 49% to make bold investments on the road to resetting and reimagining their corporate strategy for the future.

Mar chart of expectations of comany to actively pursue M&A in the next 12 months

One in five see a clear opportunity to gain market share through consolidation. However, more than one-third are looking to make transformative deals that will reinvent business models and customer reach. An almost equal percentage are looking at acquisitions focused on increasing operational capabilities, suggesting they are looking to buy vs. build in areas that proved inadequate during the pandemic.

For US private companies, the dark days appear behind them. They are looking to act fast to take advantage of opportunities, consider cooperation with competitors, and put humans — both customers and employees — at the center of their strategy.

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Summary

The EY Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.

About this article

Authors
Lee Henderson

Americas EY Private Leader; Executive Sponsor, EY Entrepreneurs Access Network

Fervent supporter of young entrepreneurs and their businesses. Connector of the entrepreneurial ecosystem. Self-proclaimed sports fanatic.

Jeff Leach

EY Americas Business Development Leader, Strategy and Transactions

Strategy and M&A advisor, delivering topline growth and bottom-line results. Dad to twins. Yogi, runner, advocate for the ethical treatment of animals.