Last week the Wall Street Journal hosted the Middle Market Network to discuss issues relevant to middle market firms in the US. The good news is that middle market companies are getting healthier. With an increase in M&A activity and a boom in the construction industry, middle market businesses are growing and CEO confidence is high.

However, middle market companies still face challenges due to the global economic environment, disruption from technology, and industry and demographic shifts. Below are some of the issues that were discussed along with our commentary:

1. M&A

Middle market activity in 2016 was strong and we can expect robust activity to continue. Debt financing is still relatively inexpensive and the prospect of tax reform is also an incentive for deals. The demographic shift with baby boomers entering retirement and selling their firms also continues to drive activity.

2. Staffing

About half of middle market firms say a lack of talent at all levels impedes growth, according to Thomas Stewart of the National Center for the Middle Market.

Once recruited, middle market companies also struggle to keep employee engaged and satisfied on the job. Stewart suggests on the job training and collaboration with higher education so students learn the skills necessary for joining the workforce.

Another way middle market companies can fill this gap is by acquiring another company for key employees. Also known as an “acqui-hire,” this practice is commonly seen with technology startups, but can be applied to organizations of any size. In fact, identifying “star employees” is an essential part of due diligence.

3. Succession planning

Many middle market businesses have no plan for succession and those that do often fail to execute them.

Succession plans must be developed long before an owner exits in order to ensure the longevity of a company. It takes time to identify and cultivate individuals that can lead the company. Business owners should consider their goals and if anyone is capable and ready to take over. When no succession plan has been put in place, selling can also be option. For strategic acquirers, this is an opportunity to develop a persuasive offer for the company to sell to you. Determine what factors including, price and personal drivers would make selling to you more attractive how it will meet the owner’s goals.

4. Technology

Automation and technology are here to stay and middle market firms need to grasp this reality and act on it. Unlike large corporations who have the money to invest in the latest technology, many middle market companies have not embraced this change either due to lack of resources of fear from works that they will lose their jobs to robots. Marco Annunziata, GE’s Chief Economist, had a few interesting comments, noting “There will always be a human component” to technology. Whether or not this is true, technology has and will continue to dramatically change business.

Cybersecurity is another major concern and only 45% of middle market companies have an up-to-date defense plan. As the world becomes more digital, many companies find they are ill-equipped to deal with data breaches and the threat of hackers. Middle market companies may think cyberattacks only happen to large corporations like Target and Yahoo!, but the reality is no business is too small for hackers to target.

5. Healthcare

Changes in healthcare policy is a major concern for middle market businesses. 74% of firms attending said it would affect their business. With so much uncertainty, navigating the changes and planning for the future has become increasingly difficult.