COSTA MESA, Calif., Sept. 1, 2004 (PRIMEZONE) -- A new study finds that an overwhelming majority of owners of privately held middle-market companies -- 76.2 percent -- believe economic expansion will continue over the next six months. This optimistic outlook is supported by the findings that more than one-third of these owners reported double-digit revenue growth during the prior 12 months and 29 percent reported double-digit profit growth during the same period.
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While the outlook is very positive, insurance costs, lack of qualified employees, the availability of capital and economic conditions were listed as significant challenges facing middle-market businesses.
RSM EquiCo, an international investment bank specializing in mergers, acquisitions and divestitures for private companies with annual revenues between $3 million and $500 million, surveyed 864 business owners in June and July 2004 as part of its Mid-Market Business Assessment. RSM EquiCo, a wholly owned subsidiary of H&R Block, has surveyed more than 6,000 owners since September 2001 in an attempt to gain insights about the large and frequently overlooked private middle market.
"Because middle-market companies play such a central role in the U.S. economy, an assessment of their business performance and economic outlook is arguably a vital market indicator," said Coby Sonenshine, president of RSM EquiCo. "We have found that middle-market business owners' confidence in the economy has grown substantially from last year at this time, and that growing business revenues and profitability are driving this optimism."
More than 76 percent of survey respondents said they expect the economy to expand during the next six months, up from 50 percent in June and July of 2003. Another 23 percent believe the economy will remain flat, and less than 1 percent anticipate a recession. According to Sonenshine, this optimism is a direct reflection of the owners' business growth.
"Many middle-market companies are achieving solid revenue growth, with 67 percent of our sample experiencing revenue growth during the past 12 months. Of these, more than half indicated growth greater than 10 percent during the same period," Sonenshine said.
Profitability is also trending up, with 60 percent of respondents reporting profitability growth in 2004 versus 42 percent during the same period in 2003. Specifically, 31 percent of respondents indicated profit growth of one to 10 percent during the past 12 months and 29 percent indicated growth greater than 10 percent during the same period. This compares with June and July 2003, when only 24 percent reported one-to-10-percent growth and another 18 percent reported growth greater than 10 percent.
Despite the favorable performance and outlook, survey respondents cited insurance/healthcare costs as the number-one challenge facing their business, followed by lack of qualified employees. In June and July 2003, the economy was the number-one challenge, followed by insurance/healthcare costs and access to capital.
"The interesting point here is that insurance costs have supplanted the economy as the primary challenge that middle-market business owners are facing, which had been the leading challenge since we began the survey three years ago," said Sonenshine. "Lack of qualified employees is a new challenge that has quickly risen to become a top priority, which indicates that companies are hiring and being more selective with their candidates."
Background on Survey
Since September 2001, RSM EquiCo has conducted the Mid-Market Business Assessment monthly among business owners considering the sale of their companies. During June and July of 2004, 864 respondents from throughout the country and engaged in a wide array of industries completed a written questionnaire.
About RSM EquiCo, Inc.
RSM EquiCo is a global investment banking firm serving private middle-market companies throughout North America. With more than 400 professionals and support personnel, the firm specializes in mergers, acquisitions and divestitures for non-public companies with up to $500 million in annual revenues. Based in Costa Mesa, Calif., RSM EquiCo is part of RSM McGladrey Business Services, a business segment of H&R Block Inc. For more information, log on to www.rsmequico.com.
