KeyBank survey shows optimism among middle market firms

CLEVELAND — Despite persistent economic challenges, 72% of middle market companies remain optimistic about their business outlook over the next 12 months, according to KeyBank‘s latest Middle Market Sentiment Report released Wednesday.

The report, which surveyed 762 senior executives from companies with annual revenues between $10 million and $1 billion, shows businesses are staying resilient by focusing on factors within their control, such as operational efficiency and technology investment.

“Disruption always creates opportunity, and those middle market companies with strong balance sheets and operational agility are showing a willingness to act in this environment,” said Ken Gavrity, president of Key Commercial Bank.

While optimism has slightly declined from 76% in the fourth quarter of 2024, the majority of respondents remain confident, with 53% expressing a favorable view of the broader U.S. economy. That confidence holds steady despite concerns about tariffs (32%), inflation (31%), higher interest rates (30%) and rising labor costs (29%).

Strategic investments fuel growth

KeyBank’s findings highlight that companies are prioritizing innovation and long-term planning to drive growth:

• Technology and AI: Nearly half of respondents (45%) plan to expand their investments in AI and tech over the next year, focusing on operational efficiency, cybersecurity, forecasting and improved decision-making.
• Operational expansion: More than a third (37%) are actively expanding their operations, aligning with recent positive momentum in capital expenditures.
• Talent development: About 34% are investing in workforce development and new product initiatives to address labor shortages and stay competitive.

M&A and capital planning on the rise

The report also found that 63% of companies plan to pursue mergers and acquisitions by the end of 2025. Executives anticipate more favorable conditions in 2026, as buyer and seller expectations align with clearer macroeconomic indicators.

On the financing front, 58% of companies plan to maintain current capital levels, while 47% are considering equity raises and 42% expect to increase debt capacity. Private equity firms (56%), commercial lenders (53%) and venture capital providers (51%) remain the most preferred funding sources.

“We’re witnessing the resilience of middle market companies more than ever,” Gavrity said. “Leaders are leaning into productivity, efficiency and digital transformation to stay ahead.”

The survey was conducted between late April and mid-May 2025. KeyBank has produced its Middle Market Sentiment Report annually since 2010.