"Acquihiring" drives middle-market M&A, says SunTrust survey
Acquiring skilled talent – “acquihiring” – has become a driver of M&A transactions and a top objective of middle-market businesses, according to a recent Business Pulse Survey conducted by SunTrust Banks Inc. (NYSE: STI).
For middle-market and small businesses that cite M&A as their top priority over the next five years, finding valuable skilled workers may be an important objective, say executives of Atlanta-based SunTrust.
“With domestic unemployment continuing to hover just above 4 percent, one of the lowest levels in a decade, many companies feel they are at a critical point competing for talent,” says Jason Cagle, head of commercial banking at SunTrust. “Businesses are looking at all opportunities to attract and retain employees from offering new benefits to sharing tax reform proceeds. Less obvious is the role M&A can play to help secure a skilled workforce. This has become increasingly important as we advise our clients.”
The SunTrust/Radius Global Market Research survey polled more than 500 decision makers at small and middle-market businesses, defined as businesses with $2 million to $10 million and $10 million to $150 million in annual revenue, respectively. Leaders of middle-market businesses in the survey rank attracting and retaining employees as their top concern, and nearly 50 percent of all the survey responders say it is their top challenge for 2018. These findings follow the release of the U.S. Labor Department's February Employment Situation report, which showed businesses adding 313,000 jobs, the most in any month since July 2016.
The SunTrust survey found that 62 percent of small and mid-market business representatives believe the U.S. economy is strong, and 79 percent are even more optimistic about their own company strength. But 59 percent of the surveyed business leaders also say that employee morale could hurt their business’s performance in 2018. Also, 54 percent say that a shortage of skilled labor and 53 percent say higher-than-average turnover could hurt performance. Current job growth is more than double the expansion in the labor force, and a record number of Americans are employed, according to the bank.
When identifying M&A candidates, the bank helps its clients “evaluate company cultures and determine upfront the strategies necessary to retain key talent, which is critical to the long-term success of the deal," Cagle says.
The SunTrust survey found one in four companies currently not offering a financial well-being program plan to do so this year. (A financial wellness benefit is an education program to help employees manage their finances). While surveyed business leaders agree it is the right thing to do, more than half said the top reasons to offer a financial wellness benefit were to retain employees and increase loyalty.
More than half of decision makers of both mid-market and small businesses believe that the 2017 Tax Cuts and Jobs Act will have a positive impact, and that they plan to invest money back into the company and/or pay employees bonuses and raises.
SunTrust operates consumer and wholesale business units, including corporate and investment banking services under the SunTrust Robinson Humphrey name.