US executives are taking action to futureproof their organizations amid economic, geopolitical and regulatory uncertainty. Supported by stable pipelines and deal-closing intentions, 83% of US executives say they expect the domestic M&A market to improve, though only 46% plan to actively pursue M&A in the next year, according to the EY 21^st Capital Confidence Barometer (CCB).

"US business leaders are acting from a position of strength, building on the successes they've achieved, while remaining watchful for shifts in the macro environment and geopolitical chessboard," said Bill Casey, EY Americas Vice Chair, Transaction Advisory Services. "They are keenly aware that risk to their business can take many forms. More than half tell us that regulations — such as supply chain disruptions from trade and tariff disputes, or climate change policies — could have an impact on their business growth."

The EY semiannual survey of corporate confidence finds US executives focused on value creation and portfolio resiliency. As detailed in the EY report on reshaping business results, executives are strengthening margins, stress testing their business plans, assessing portfolios for vulnerabilities and divesting assets that don't align with their growth strategies. US corporate leaders appear confident that these efforts will be rewarded: A large majority (80%) expect their profit margins to increase over the next 12 months, and a similar majority (79%) expect sales and revenue to rise.

Private equity firms bring growth, dynamism to M&A market

Over the next 12 months, 63% of US executives expect increasing competition for assets from private equity firms, compared with just 37% who see corporate buyers as the competition. Given executives' focus on resiliency building, 52% of US respondents say they see no change in their M&A pipelines, while 47% expect an increase, down from 54% the prior year.

"Dealmakers of all types are diligently vetting opportunities for strategic fit and sustainable growth," said Casey. "There's an understandable sense that the margin of error for mergers and acquisitions has shrunk, as conditions become challenging and unpredictable, and we see pressure for deals to deliver significant benefits over the long term. Still, executives are mindful that choosing not to engage in dealmaking could diminish future competitiveness."

Increasing allocation to technology-driven transformation is key to future growth

The great majority (91%) of US executives say they have a clear vision for digital technology's transformational impact on their business strategy, and 83% say it will provide them with an opportunity to reposition their overall business strategies and reshape their portfolios. Technology and digital capabilities also account for a large and growing share of annual investment capital: 85% of US executives say they spend 25%–49% of their total capital on technology, with more than half of that allocation (55%) focused on new growth opportunities.

The EY Capital Confidence Barometer also found that, while just 24% of businesses are investing in digital and technology assets through in-house development, a total of 45% are looking toward outside opportunities: joint ventures and alliances, and direct acquisitions and investments.

Looking ahead, both global and US executives agree that artificial intelligence (AI) and machine learning (ML) will have the biggest impact on their business in the next two years. Among US executives, 35% cite AI/ML as the top impact, followed by analytics (23%), Internet of Things/edge computing (19%) and automation/robotics (16%).

Talent search most challenging for tech positions

The strong US job market has created challenges for executives seeking to hire and retain the best talent. Of the 51% of US executives who say they're having difficulties hiring or retaining staff, 54% say they are challenged by finding and retaining talent with specific technical skills relevant to their core business. Nearly 4 out of 10 (38%) say digital and technology specialists are in short supply. Accordingly, 21% of US executives say acquiring talent is the main strategic driver for pursuing acquisitions.

"While challenges abound, US executives are working to strike an effective balance between the careful work needed to build resiliency and the visionary outlook that empowers them to continually innovate and outpace their competition," says Casey. "That approach is a key reason why the US is the No. 1 investment destination for both global and US businesses."