A recently completed Stifel Financial Corp. survey of corporate executives, business owners, and private equity investors finds the tight U.S. labor market is the biggest perceived threat to business today. Nearly all those surveyed (95%) have had to raise wages in order to attract or retain employees, and an overwhelming majority (81%) say at least some of those costs are being passed onto customers.
Addressing Long-Term Implications of Labor Constraints
“The difficult environment for hiring and retention, coupled with wage inflation, is forcing business leaders to think outside the box for creative solutions to the labor pains we’re experiencing across many sectors,” said Michael Kollender, Managing Director and Head of Consumer & Retail and Diversified Industrials Investment Banking. “While most companies are increasing investment in technology and automation, our survey finds that more than half of respondents (54%) are also emphasizing potential acquisition opportunities that promote greater operational efficiency. We believe, in some cases, a thoughtful M&A strategy can be a very effective mitigation tool.”
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Capital-Raising Environment
As labor market conditions fuel additional M&A activity, many companies are taking advantage of low interest rates and strong financial market conditions to raise additional capital. More than a quarter (26%) plan to raise debt or equity in the foreseeable future to fund strategic initiatives. That’s on top of 19% who say they’ve already done so. Another 11% plan to raise capital now, while terms are favorable, even though they don’t need it right away. The rest (44%) expect to have access to capital at attractive terms in the future.
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Additional Survey Findings: Supply Chains, Inflation, Public and Monetary Policy
The survey, focused specifically on consumer, retail, and diversified industries participants, also found that:
“While there’s a general sense of optimism following a long period of COVID-induced disruption, business leaders will need to manage everything from labor shortages to potential tax reform – and all things in between,” summarized Kollender. “Transaction pipelines at Stifel are at record highs, as companies race to adapt and transform to today’s fast-changing environment. Whether you’re an executive, entrepreneur, or investor, understanding how external forces impact business and being able to react swiftly and decisively is a key to success.”
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