CFOs Increase Focus on Tech and M&A

Each quarter, Deloitte’s CFO Signals study tracks the thinking and actions of leading CFOs representing North America’s largest and most influential companies.

This year’s results reveal a distinct focus on technology and M&As among CFOs. Concerning company strategy, more than three-quarters (76%) of CFOs expect digital transformation and technologies to play a greater role in 2024. In fact, 80% of CFOs expect their organizations to embed more automation/digital technologies into their operations in the coming year.

Nearly half (48%) plan to increase their focus on new markets inside North America versus the 30% who indicated their focus will be on new markets outside the region. Slightly more than one-quarter (26%) of CFOs say inflation will affect costs to the same degree in 2024 as it did in 2023, and half of CFOs expect their companies to raise prices for a substantial portion of their products/services to offset it.

Regarding capital, 67% of surveyed CFOs indicate they will allocate or reallocate capital to new business investments. This is particularly interesting, considering 62% of CFOs believe now is not a good time to take on greater risks. More than three-quarters (76%) of surveyed CFOs expect cybersecurity to be a top priority for the audit committee over the next 12 months, beyond financial reporting and internal controls, and indicate enterprise risk management (43%) and finance and internal audit (40%) as the next top priorities for the audit committee in 2024.

Sixty-five percent of surveyed CFOs said they expect their companies to offer a hybrid work arrangement in 2024. For some, that could be a silver lining or a looming cloud depending on where an organization and their talent stand on the topic.

2024 M&A Strategy
Of the surveyed CFOs planning to pursue M&A and joint venture opportunities (JV), 57% say increasing competitive positioning and/or capturing sector and market leadership best describe their companies’ top M&A strategy.

Strengthening a core business or raising capital follow, cited by 34% of CFOs.

Slightly more than one-third (34%) of CFOs expect their companies to increase the average number of deals they close over the next 12 months, while just 13% expect a decline over the same period. Almost half (46%) do not expect any change, with 7% indicating “don’t know/not sure.”

Looking further out, more than half (51%) of surveyed CFOs project M&A to account for 1% to 10% of their companies’ growth in the next three years, and 19% of CFOs expect between 11% and 50% of their companies’ growth to derive from M&A in that period.

Almost half (49%) of surveyed CFOs indicate they will likely use all cash to finance their deals in the next year, while 30% expect to use alternate structures such as JVs and strategic partnerships.

Nearly three-quarters (71%) of surveyed CFOs say that the valuation of assets/ widening bid-ask spreads is among their companies’ top-three challenges to M&A or deal success. Integration/divestiture (36%) and the status of debt markets (30%) round out the top three most-often cited responses.

“At the cusp of 2024, CFOs expressed a far more conservative outlook than in the previous quarter’s CFO Signals survey, likely due to the continued impact of high interest rates, inflation and tensions caused by geopolitical conflict,” said Steve Gallucci, national managing partner, U.S. CFO Program, Deloitte LLP, and global leader, Deloitte Touche Tohmatsu Limited. “However, their concerns are contrasted by signals that the new year will bring greater M&A activity as well as investments in digital technologies, both for strategic and operational purposes, indicating there may be a light at the end of the tunnel.”

“Surveyed CFOs are looking to deploy capital via M&A as a growth lever in 2024,” said Adam Reilly, national managing partner, Mergers, Acquisitions and Restructuring Services, Deloitte & Touche LLP. “This finding aligns with the results of our recent ‘2024 M&A Trend Survey: Mind the Gap.’ Should the Federal Reserve come through on expectations for reduced interest rates, that, coupled with some strategic pivots, could potentially spur more deal-making.”

Since 2010, Deloitte’s survey has provided key insights into the business environment, company priorities and expectations, finance priorities and CFOs’ priorities. Participating CFOs represent diversified, large companies, with 81% of respondents reporting revenue in excess of $1 billion. Nearly one-quarter (24%) of CFOs are from companies with greater than $10 billion in annual revenue.