American Express CFO Survey: Economic outlook high, M&A activity to ramp up

Optimism about economic expansion is on the rise among senior finance executives in the United States and around the rest of the globe, according to the annual American Express/CFO Research Global Business & Spending Monitor. In fact, the level of optimism was the highest in the four years that the survey has been conducted, with three in four (75%) executives expecting modest to strong economic expansion over the next twelve months -- up from 71% in 2010. The U.S. figure was even higher at 79%, although most predict modest growth.

According to the report, which surveyed 665 senior finance executives from the U.S., Europe, Canada, Latin America, Asia and Australia, the economic outlook was brightest in Argentina, where 89% of finance executives expect growth in the coming year, followed by India (87%), Mexico (84%), Germany (83%) and Singapore (81%).

The survey also indicates that mergers and acquisitions (M&A) activity is likely to ramp up significantly going forward. With many companies sitting on large cash stockpiles, global finance executives report they will deploy more capital toward mergers and acquisitions as well as revenue drivers such as marketing, sales and customer service.

"Finance executives are finally moving away from budget cuts and opening up the company coffers to drive growth," said Janey Whiteside, senior VP, Global Client Group, American Express Corporate Payment Solutions.

Deal-making tops the list when it comes to plans for capital deployment, with 69% of the executives focused on aggressive M&A activity over the next twelve months. Respondents say their companies will use cash somewhat or very aggressively in the next twelve months for each of the following:

•68% will use cash to expand operating activities and headcount.

•65% plan to increase capital spending.

•63% aim to pay down debt.

As a result of lessons learned during the downturn, companies will be more cautious when investing their savings. Seventy-nine percent of the surveyed executives said they will conduct more rigorous due diligence of M&A opportunities; 71% will require a detailed business case to increase spending on headcount and operating activities..

“In areas ranging from M&A to headcount to service, companies are looking closely at the justification for spending, laying the foundation for more sustainable expansion," Whiteside said.

In other findings, 54% of the executives ( 64% in the United States) plan to invest more over the next twelve months on expanding market access through business development activities such as sales and marketing.

Job growth will be strongest in sales -- 48% plan to increase their sales headcount. Thirty-seven percent expect headcount to increase in operations, 34% in IT, 33% in marketing and R&D respectively, and 32% in customer service.