‘Companies Ready to Deploy Cash in 2012′
Nearly half (41 percent) of companies plan to deploy cash reserves in the new year, according to a recent Deloitte poll of business professionals from a cross section of industries.
Respondents also suggest that their companies are likely to execute acquisitions (28.2 percent), increase capital budgets (20.6 percent), repurchase shares (11.8 percent) or issue one-time dividends or increase dividends (6.1 percent) in 2012.
“The good news is that cash balances have risen to historic levels, balance sheets are strong and companies have options,” says Justin Silber, principal, Deloitte Financial Advisory Services LLP.
“The bad news is that literally trillions of dollars in corporate cash reserves aren’t earning much – if any – return as interest rates remain at historic lows. In the meantime, investors expect equity returns on their capital while also looking for boards to defend against market volatility.”
Silber continues, “In many cases the C-suite thinks growth through acquisition is ideal but division heads believe R&D investments are key. Each internal corporate group can add value, but first shared criteria by which to measure the deployment strategy should be reached so that strategies to retain, return or deploy cash are more likely to succeed.”
Poll participants cite lack of attractive alternatives for deploying cash (34.3 percent), no common framework, tools and metrics to evaluate alternatives (13.6 percent), and siloed decision making (12.1 percent) as the biggest challenges in executing cash deployment strategies at their organizations.
“We keep hearing from companies that they’re struggling to develop a shared corporate strategy and organizational framework through which multiple teams can work together to determine the best use for cash reserves in the new year,” says Silber.
“Getting your strategic house in order for cash reserve deployment should be the top resolution for corporate leadership teams in 2012.”