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Portfolio > Alternative Investments > Private Equity

Private Companies Look to Boost Capital Investment, Hiring

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Private companies’ optimism about the global economy is translating into plans for major capital spending projects and increased headcount over the next year, according to a new survey.

PwC US’s quarterly Trendsetter Barometer, released Tuesday, found that 59% chief executives and chief financial officers at privately held companies was upbeat about U.S. economic prospects for the next 12 months. 

Moreover, 92% of private companies that sell abroad believed that the world economy was either growing or staying the same.

Only 8% of these companies — the lowest percentage in years, PwC said in a statement — described the global economy as slowing.

“Private businesses see resilience in the economic recovery, both at home and globally,” Rich Stovsky, U.S. leader of PwC’s private company services practice, said.

“This confidence is evident in the survey respondents’ strong revenue growth projections, which they put at over 8% for the next 12 months, with more than one-third of them expecting double-digit growth during that period.”

The new survey incorporated the views of leaders at 118 product sector and 87 service sector companies, averaging $355 million in revenue/sales, and including $500 million-plus companies.

Capital Spending Climbs

Private-company respondents said they planned to invest an average of 8.4% of their sales in capital projects over the next 12 months. Just once in the past several years had there been such a high a level of spending commitment — 10% in the third quarter of last year — PwC said.

“During the economic downturn, we saw opportunistic companies invest strategically in capital projects to gain a competitive edge and spur faster growth,” Ken Esch, a partner in PwC’s private company services practice, said.

“Now that the economy has stabilized, many of their peers are playing catch-up, investing in deferred maintenance, infrastructure upgrades, and emerging technologies to enhance their own growth.”  

PWC asked a subset of Trendsetter company leaders about their technology investments:

  • 75% expected technological advances to have a moderate-to-major effect on their operations over the next several years, with 44% of respondents expecting a major effect  
  • 70% of companies planned to invest in technology that would automate operations and increase productivity
  • 60% planned to strengthen their cybersecurity
  • 57% said they would devote IT dollars to data management and analytics
  • 42% expected to focus their tech spending on researching and engaging customers

The survey found fewer private companies voicing concern about headwinds. Fifty-nine percent of respondents anticipated lack of demand as a barrier to growth, down from 65% a year ago.

In addition, 42% of companies expressed concern about legislative/regulatory pressures, compared with 55% with this concern a year ago. And only 22% were worried about increased taxation, down from 37% a year earlier.

Where the Talent Is

Finding qualified workers continues to challenge private companies, according to the survey. Thirty-two percent of survey respondents cited this as a barrier to growth.

Fifty-six percent of Trendsetter private companies said they would add employees in the coming year, but would do so conservatively, increasing headcount by just 1.8% as they continued to search for the right people with the right skills at the right place and cost.

The survey found that the search for skilled workers was influencing a variety of private companies’ business initiatives.

The main reason geographically expanding Trendsetter businesses gave for entering new U.S. markets was to tap a better skills base.

Likewise, 54% of those pursuing mergers and acquisitions, joint ventures and strategic alliances said their aim was to access skilled employees.

Other Survey Findings

  • Two-thirds of Trendsetter companies planned to increase operating expenditures across a range of areas, including new products and geographic expansion
  • Forty-six percent of companies selling abroad said they would increase capital expenditures, compared with 27% of their domestic-only counterparts.
  • Nine percent of international companies projected higher revenue growth, compared with 7.3% of their domestic peers.

Check out Advisors See ‘Slow and Steady’ Growth Through Year-End: SEI on ThinkAdvisor.


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