Hartford Business Journal

September 7, 2020

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We believe it's important to recognize the achievements of people who've had a positive effect on others and the communities where they work and live. KeyBank is proud to sponsor Hartford Business Journal's upcoming C-Suite and Lifetime Achievement Awards. Looking for financial guidance for your commercial business? Contact Matt Hummel at (860)-293-4138 Key.com is a federally registered service mark of KeyCorp. ©2020 KeyCorp. KeyBank is Member FDIC. 190104-520977-1157456025 We're honored to be on your journey of success. S P O N S O R E D C O N T E N T By Matthew E. Hummel, KeyBank Commercial Banking Team Leader E ach quarter, KeyBank surveys 400 middle market business executives (defi ned as those companies within the $10 million to $2 billion range) to understand the impact of cur- rent macroeconomic conditions and government policies on the business environment. The latest survey, conducted several months after the coronavirus national emergency began, shows outlooks are mixed; while Q2 numbers were better than projected and optimism is trend- ing upward, business owners continue to be wary of the nation's economic health. Outlooks have lifted since the pandemic began Overall, the impact of COVID on middle market businesses has not worsened since the second quarter. Compared to late March, when shut- downs to combat the spread of COVID-19 took hold, outlooks have shifted back toward being slightly more positive. When asked about their business health, 51% of owners stated they were very positive or somewhat positive about their performance (vs. 47% in March); those who reported a negative perception of their business health improved from 37% to 26%. A strong majority of respondents (70%) told Key- Bank that the impact on their business so far has been either as expected or better than the original projections they made when fi rst faced with the economic reality of COVID in March. Changing How the Middle Market Works Most businesses had to make changes to comply with regulations designed to keep their employees and communities healthy. A majority (76%) reported changing their operations somewhat or very much in response to COVID-19. Top actions were: • implementing enhanced safety measures (75%) • reducing staff (57%) • applying for loans or lines of credit (51%) Half of businesses who made changes as a result of COVID-19 report they are somewhat or fully operating again. Even so, most owners and executives are not staffi ng their businesses at pre-pandemic levels. Many companies who reduced staff say they are unlikely to bring back all employees. That said, the majority of customers we've talked to believe that the Paycheck Protection Program was effective and helped to save jobs at their companies. Impact on middle market M&A The pandemic has also made the merger and acquisitions forecast murkier. While 44% of respon- dents reported that they were "extremely likely" or "very likely" to complete an acquisition in the next six months (down from 46% in December 2019), most businesses report that lower company valu- ations due to COVID-19 are negatively impacting their likelihood to complete an acquisition. Some Bright Spots in Dark Days Middle market businesses are slowly restoring more normalized operating and fi nancial positions after taking steps to help their companies with- stand the initial brunt of the pandemic. However, it's clear that their worries are far from over. For the remainder of 2020, economic recovery will be tied to public health and will require continued cooperation from the private sector and state and federal government. This material is presented for informational purpos- es only and should not be construed as individual tax or fi nancial advice. Please consult with legal, tax and/or fi nancial advisors. KeyBank does not provide legal advice. All credit products are subject to credit approval. KeyBank is Member FDIC.© KeyCorp 2020 C FMA 200817- 858979. Matthew E. Hummel serves as Commercial Banking Team Leader for KeyBank responsible for driving the bank's com- mercial business growth and leads a team of com- mercial bankers serving middle market clients in Connecticut and western Massachusetts. He has more than 30 years of com- mercial banking experience, strategically aligning banking resources to the needs of middle market companies re- quiring complex debt, capital markets, currency, treasury, and other fi nancial solutions. Hummel has offi ces in Key- Bank's 100 Pearl Street, Hartford and 195 Church Street, New Haven locations and can be reached at 860-293-4138 and Matthew_E_Hummel@keybank.com. Middle market shaken, but not broken, by COVID-19

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