SunTrust Sees Bright Days Ahead For SMB M&A

It’s been said that small business is the lifeblood of the economy, and so it would follow that optimism among SMB executives would bode well for strength at the corporate level and beyond.

But in a bit of changeup as to how firms are targeting growth, expansion through strategic corporate actions — think mergers, buyouts and acquisitions — remains top of mind. Earlier this month, SunTrust released its 2016 Business Pulse survey, which found a shift in the way firms are prepping for expansion over the next several years, as evidenced by responses from 508 firms.

In an interview with PYMNTS, John Stallings, SunTrust’s Virginia division president, said that his firm’s survey, across two tranches — SMBs logging $2 million to $10 million annually and mid-market firms with revenues of $10 million to as much as $150 million in top line — shows increased interest in mergers and acquisitions as both a growth and competitive strategy. “The goals,” he said, “are for firms to grow revenues and also profitability.” The overarching mindset, he added, is one of opportunism. As many as 36 percent of middle-market companies are looking to uncover mergers-and-acquisitions opportunities, which is up from 25 percent previously.

That sense of opportunity comes as firms across any number of industries, in the wake of the Great Recession, “tightened their belts,” said the executive, “and found ways to boost operational efficiencies.” The stage has now been set for smaller firms, already financially healthy, to look to get bigger in the United States and abroad, which is tied to a heightened interest in trade as an avenue for sustained momentum.

To be sure, there are challenges for small and mid-sized firms, said Stallings, with opportunities for B2B services from firms occupying technological or service niches — such as cybersecurity or cash flow management and stability, which was cited as being a key concern among 66 percent of the firms surveyed. In this latter scenario, said Stallings, there has been increased demand for SunTrust’s treasury management products, with interest in hedging strategies as firms become global in scope. The statistics put forth by SunTrust show that 29 percent of middle-market firms want to expand into international markets, up markedly from 17 percent a year ago.

Looking ahead to how financing will take shape as firms look to grow their scope, revenues and profits, Stallings said that SunTrust’s clientele has expressed interest in debt and equity financing and also in tapping the private equity industry for funding. That dovetails with sentiment from 88 percent of respondents who feel that their firms are in good financial shape.