What to Expect from the Middle Market in 2019
Equipping workers with new skills is one of the ways middle market firms believe they can transform themselves
If there’s a theme that captures how private and mid-sized companies may evolve in 2019, transformation rises to the top. To get the job done, leaders across the middle market are prioritizing employee skilling programs, M&A deal-making, and bold action against information security threats as key areas of focus for the next 12 months.
Equipping workers with new skills is one of the ways middle market firms believe they can transform their companies in 2019. In Deloitte’s most recent mid-market technology survey, 61 percent of corporate respondents say they plan to focus on employee reskilling to take advantage of new waves of innovation. This transformation is happening in areas such as the auto industry, where equipment manufacturers are retraining engineers in skills such as artificial intelligence (AI) and the Internet of Things (IoT) to supply the next generation of connected and autonomous cars. It’s also happening in healthcare, where medical workers are learning new forms of patient interaction such as online doctors’ visits.
Change is here
In some middle market settings, companies are using gamification to provide training. Fifty-eight percent of respondents in our technology survey say they’re using experiential formats to help workers gain proficiency in cognitive technologies such as natural language processing.
Reskilling in these areas is part of a larger boom as global spending on AI and cognitive systems is expected to more than triple by 2022.
The prospect of new corporate combinations is another area that’s poised to transform the middle market this year. According to Deloitte’s 2019 M&A Trends report, nearly 90 percent of private equity (PE) leaders surveyed foresee an uptick in M&A deal flow in 2019. Respondents anticipate a significant increase in deals valued between $500 million and $10 billion, with executives predicting more mergers between technology and manufacturing firms than any other combination of industries. The optimistic outlook on M&A deals comes as PE firms sit on a record $1.14 trillion in dry powder for investments – a strong indicator of a potentially busy M&A cycle.
As in years past, cyber security is another key concern for the middle market. Managing cyber risk is the top technology priority over the next 12 months according to respondents in our mid-market technology survey. Meanwhile, half of private firms rank IT governance processes and principles among the top three concerns for their organizations.
The nature of work may be changing, the makeup of companies might look dramatically different in the year to come, and the sophistication of data breaches might present tough tests for middle market companies this year. But there’s an opportunity amid the challenges.
Private companies have the fundamentals in place to take on big, transformative changes as they uncover new opportunities in the marketplace in 2019.
Jason Downing is a Vice Chairman of Deloitte LLP and the US Deloitte Private leader, where he oversees the strategic direction of Deloitte’s portfolio of services to private company and mid-market clients. He most recently served as managing partner of Deloitte LLP in the North Texas marketplace and remains active with several North Texas clients and community leadership roles. Jason holds a BBA in Accounting from Stephen F. Austin State University and is a Chairman of the Board for United Way of Metropolitan Dallas.