US mid-market shines despite ‘headwinds’

Companies in the US mid-market grew revenues at a rate of 8.4% in 2011, though growth during the next 12 months is expected to slow slightly, according to research from the National Center for the Middle Market.

Companies in the US mid-market grew revenues at a rate of 8.4% in 2011, though growth during the next 12 months is expected to slow slightly, according to a survey from the National Center for the Middle Market, a partnership between The Ohio State University and GE Capital.

“We’ve discovered that the middle market continues to be an engine of growth,” said Anil Makhija, finance professor at Ohio State and academic director of the center.

Makhija was speaking at the Association for Corporate Growth’s 2012 InterGrowth Conference in Dallas Wednesday.

More than 70 percent of US mid-market companies reported increased gross revenue in the first quarter of 2012 compared to the first quarter of 2011. The research does not distinguish between companies that experienced increased revenue from “organic growth” and those that grew revenue via completing add-on acquisitions, Makhija said. About 40 percent of businesses in the study were private equity-backed companies.

The survey, conducted in March, found that US healthcare and manufacturing businesses generated the most revenue growth during the past year, growing 13.1 percent and 11.5 percent, respectively.

During the next 12 months, however, revenue growth for US mid-market companies – defined as businesses with revenue between $10 million and $1 billion – is expected to slow slightly to 7 percent.

“There are some headwinds that the middle market is beginning to see,” Makhija said.

Survey respondents cited the cost of healthcare, ability to maintain margins and uncertainty about government regulation as the three most significant barriers to growth during the next 12 months.

Still, S&P 500 businesses expect gains of just 4.7 percent over the same period.

“8.4 percent is a robust number, and 7 percent is nothing to sneeze at either,” Makhija said.

ACG president and chief executive officer Gary LaBranche echoed the strong relative performance of US mid-market businesses during a separate panel discussion, saying, “Middle market companies outperform almost all other [businesses] by a significant factor.”

In the US, about 9 percent of mid-market companies have both grown revenues by 10 percent in 2011 and are also predicted to show 10 percent growth in 2012.

The National Center for the Middle Market survey included data from roughly 1,000 CEOs, CFOs, and other C-suite executives of US mid-market companies.