Dive Brief:

• Despite the setbacks of 2020, CFOs anticipate the new year will bring recovery and new opportunities, the 2021 BDO Middle Market CFO Outlook Survey, released Monday, found. 

• The survey, conducted among 600 middle market CFOs in the U.S. in September 2020, found 60% of respondents to forecast economic recovery and 56% to expect revenue increases in 2021. 

• "Unprecedented was the buzzword in 2020 for good reason," BDO CEO Wayne Berson said in a statement. "Many middle market companies persevered through levels of transformation and disruption in one year akin to what some companies experience in a full lifecycle, but rather than hunker down and endure, middle market leaders endeavor to move forward to refresh strategy and enhance agility."

Dive Insight:

2021 will bring increased demand and opportunity for innovation across every industry, the CFOs predicted. Last year, the pandemic accelerated digital transformation at 39% of companies, and opened new expansion opportunities for products or services for 36% and geographies for 31%.

"It's clear the pandemic forced businesses to reflect, and as a result, middle market leaders took action," Matt Becker, national managing partner of tax at BDO, said. "They refreshed strategy, they prioritized what mattered most, and now they're aiming to emerge as more resilient and agile companies."

Respondents pointed to things like faster decision-making, accelerated digital transformation and new opportunities for service or geographic expansion as trends that will ultimately help their companies shore up their resilience, Becker said.

Deal flow was less steady in 2020 as CFOs assessed outcomes against the pandemic's impact. Cash infusion was critical to the middle market in 2020, and liquidity remains a key priority for 2021, Becker pointed out.

Nonetheless, CFOs remain optimistic and many plan to seek PE investment (29%), undergo a merger or acquisition (24%) and pursue an IPO (20%).

The survey broke down finer points by industry, including sections on energy, healthcare, life sciences, manufacturing, retail and technology. While much of the data was uniform across the board, retail and manufacturing shared the least optimistic view of 2021, while healthcare and life sciences led the pack. 

As for reporting, managing disclosures and risk factors is a top challenge as CFOs work out how best to communicate pandemic-related impact on matters that may be material to stakeholders.

While returning to the office, or at least approaching a semblance of pre-pandemic workplace structure, is top-of-mind for many executives, 43% of CFOs plan to increase or establish permanent remote work options. 

Optimization will also be critical, with 28% of CFOs planning to eliminate or consolidate their real estate footprint. The respondents also intend to build a "nimbler workforce" through automation (38%) and outsourcing (32%).

"Digital transformation is the top cited growth strategy for 2021," Becker said. "The middle market plans to continue building the right technology infrastructure and capabilities to both meet customer needs and to power their own businesses."

"Balancing opportunity with optimization is the middle market mantra," Jay Duke, national managing partner of advisory at BDO, said in the study. "Changes to the marketplace mean new and untapped potential to seek advantage, but companies must ensure their operational and digital strategy reflects new realities before embarking on any strategic move or partnership."

When it comes to risk, middle market CFOs' top cited threats include a prolonged economic downturn, competitive pressure, supply chain disruption and falling behind on technology or innovation.

Emerging from an election year, CFOs are also concerned about tax challenges, naming understanding total tax liability (19%) and navigating shifting trade and tariff policies (17%) as top concerns.