US execs plan to boost digital spend, continue M&A rebound
Most US business leaders plan to increase digital investment in 2021, according to EY’s 23rd US Global Capital Confidence Barometer. M&A activity, meanwhile, is expected to continue its rebound since bottoming out in 2020.
The pandemic heavily tested business models, supply chains, and digital infrastructure. Most surveyed US businesses (79%), however, thought their digital investments performed well during the unprecedented disruption of Covid-19.
Businesses won’t rest on their laurels, though, with the pandemic pressuring most to shift from fifth to sixth gear in their digital journey. Indeed, 76% of US executives said they plan to increase their digital investment as part of their 2021 strategy. Additionally, 73% will boost budgets for customer engagement and 74% will invest in workforce management, according to the EY survey.
“Everyone is grappling with what changes are permanent and which are temporary, but it’s clear that digital investment is a necessity,” said Bill Casey, EY Americas vice chair, strategy and transactions. “Executives are doubling down on their ability to connect revenue sources more tightly to business, employees to employees, and customers to customers.
“And many will test the waters of M&A to achieve those digital ambitions,” he added.
Execs still view M&A as a key accelerant of strategic transformation, even in an uncertain economic environment. The report found that 45% of US business leaders expect to pursue M&A in the next 12 months. Though that number is slightly below the historical average, it represents a remarkably sturdy number after the turmoil of 2020.
M&A in 2020 saw a steep drop off due to Covid-19 even in the first quarter, and a bottoming out in Q2. That was followed by a Q3 rally and then further gains in the fourth quarter.
With more than half (55%) of respondents accelerating their portfolio reviews, Casey expects that more investment and divestment is on the horizon. “This all suggests a busy 2021 for corporate strategy, as businesses apply the lessons learned in 2020 to both organic and inorganic growth,” Casey said.
US leaders plan to target approximately 30% each to transformative deals, bolt-ons, and deals that improve operational capabilities. North America will be the primary target geography, with 42% anticipating the most growth and opportunities in that region within the next three years. The US remains the top M&A destination, followed by Canada and the UK.
