CEO Outlook: The private company perspective

Private company chief executive officers (CEOs) are navigating a US economy that has entered the age of compound volatility: the combination of disruptive risks to growth and structural changes—from sticky inflation to the energy transition to a shifting labor market—that raise the cost of doing business with little margin for error on strategy development and execution.

Not surprisingly, private company CEOs expect the next three years to bring slow growth, increased technology risks, and geopolitical uncertainty. Yet they also believe that emerging technologies and a greater focus on environmental, social, and governance (ESG) can help them improve their margins and their competitive position.

Our annual KPMG CEO Outlook surveyed US private company CEOs and suggests that leaders will be those who focus on four key areas: technology/GenAI, ESG, talent, and inorganic growth. This edition of Privately Speaking explains why.

US private company CEOs recognize that action on the ESG agenda will be key to building customer relationships and driving talent attraction. At the same time, they also say that ESG will shape their investment priorities with many suggesting ESG will impact their financial performance and the way they shape their capital allocations going forward.

They also suggest they see significant downside to failing to live up to their stated ESG objectives. The biggest concern is that they might lose faith with potential new recruits. But they also worry that missed ESG objectives may lead to a higher cost of capital and challenges raising new finance in the future.

The good news is that the majority say they have fully embedded ESG into their business to create value, and most expect to see financial as well as reputational returns on their investments within the next five years. Nearly 80 percent also say they are confident they have the capability and capacity to meet new ESG reporting standards. 

Private company CEOs understand that ESG is central to building trust with customers, suppliers, investors, and employees. They recognize that stakeholder trust will be paramount as they navigate disruption and work to transform their businesses amidst longer-term structural changes in the economy. But they also expect to get significant business value from their investments by embedding ESG into their business as a means to value creation.

-Sal Melilli, Partner, National Audit Leader, KPMG Private Enterprise, KPMG LLP

Mergers and acquisitions will likely play a significant role in driving growth for many private market companies over the next three years. In our survey, 63 percent of CEOs said they were likely to undertake acquisitions that would have a significant impact on their overall organization. A further 33 percent said they would likely make acquisitions but expected the impact on their organization to be moderate.

That being said, private market CEOs still suggest they are more likely to focus on organic growth over inorganic for the time being. However, our data also indicates that activity could increase if market conditions stabilize, competitive landscapes change, or the cost of financing changes significantly.

"If the market finds its footing, with a potential end to rate hikes in sight and green shoots in IPO activity, we expect to see organizations restart their inorganic growth plans to help them scale and invest in the future of their businesses."

-Conor Moore, Partner, Global Head of KPMG Private Enterprise