It is a real pleasure to welcome the first of our guest bloggers from around the RSM network. Opening up the blog to our experts will gather us some useful insights into the global business environment as well as the markets we operate. This week I am delighted to feature post from Mike Kirley, Chief Operating Officer and International Strategy Leader at McGladrey, the US member firm of RSM.
US off to a bright start in 2012
A manufacturing resurgence, decreasing unemployment, companies investing in growth again — some strong rays of sunshine have begun to show through what has been a cloudy business environment in the U.S. for the last few years. Optimism is increasing across many segments, particularly among the dynamic middle-market companies McGladrey serves. These growing, mid-sized organizations fuel a diverse and healthy U.S. and global economy.
McGladrey’s winter 2012 Manufacturing and Distribution Monitor, a rare slice of data that gives insights into privately owned manufacturers, showed that the number of executives optimistic about the U.S. economy is 146 percent greater than it was in fall 2011. Confidence in the global economy also increased significantly — a critical data point since many participants have international operations. Most importantly, the number of participants who said their companies are thriving and growing averaged 45 percent throughout 2011. This is nearly twice the level of the previous year’s survey and comparable to pre-recessionary numbers. It’s too soon to say whether the U.S. manufacturing renaissance will become reality; however, we are encouraged by these insights from our research.
Manufacturing is not the only sector showing increased optimism. As one of the nation’s leading firms serving private equity groups, McGladrey saw an increase of 40 percent in our transaction support services practice last year, a key indicator of overall growth in private equity. In addition, IPO activity is heating up again. We were recently engaged by one large private equity firm to begin the process of preparing 48 of its portfolio companies for the IPO journey. It will be interesting to see if the JOBS Act further increases IPO activity within our client base.
We’re also witnessing companies freeing up cash they were previously holding to invest in other areas like technology and operational improvement projects that were shelved during the recession. Particularly in the middle-market, companies are looking for guidance on getting more out of their technology as they replace older systems with world-class solutions. They are also seeking opportunities to drive down costs with a focus on right-sizing relative to revenue growth vs. the across the board cuts we have been seeing. Finally, they’re looking to improve in areas such as financial processes and supply chain to be more competitive.
Even so, we don’t anticipate clear skies just yet. The U.S. housing market continues to be soft in many parts of the country, it’s a presidential election year, energy costs are rising again, and tax cuts that affect many mid-sized businesses are set to expire on 31 December, 2012. In addition, middle-market companies are facing increasing regulation domestically and abroad. Any one of these things could greatly impact their strategies and ability to invest in growth.
This is where McGladrey and our RSM International colleagues come in. Through our deep understanding of our clients’ unique situations, their industries and the general economic and regulatory environment in which they operate, we are able to help them make confident business decisions to drive their future success both here at home and around the world. No matter what the forecast.