Growth

Mise à jour 01/03/2023

Growth prospects remain intact for European SMEs (version anglaise)

Image
Eurazeo views tribune SMES
26/01/2023 - 4 mins

Europe’s small and medium-sized companies have been hard hit by the multi-faceted crisis of the last two years, but Erwann Le Ligné and Florian Zimmermann argue that many of them will emerge strengthened by recent ordeals, well positioned to pursue their ambitions of developing into pan-European and even global champions.

 

SMEs that have prepared well can weather this storm

The successive shocks of the last three years have severely shaken the entire economy. But even as we brace for a likely recession, there is at least some heartening news out there: many of Europe’s small & medium enterprises have taken advantage of the recent spate of disruptions to raise their game. As a result, those SMEs that successfully tightened up their governance, diversified their geographic exposure in sourcing, production and sales, and successfully pursued the digitalisation of their operations, are today relatively well positioned to absorb future shocks.

This is not the first time European SMEs have faced such an existential threat. The financial crisis of 2008 slammed on the brakes for companies across the spectrum. However, the difference between then and now lies in the nature of the threat. The major challenge facing entrepreneurs after the great financial crisis 14 years ago was one of liquidity. Without access to funding, everyone was put on hold, but once the spigots reopened, a lot of companies were able to rebound quite quickly. The Covid shock was different because government moves to lock down the economy revealed new challenges that no one had faced before, notably a global supply chain disruption.

 

Governance, management and finance will be key

Today, for anyone surveying the SME landscape in a bid to identify likely winners, or even just survivors, the key lies in governance, management and access to capital.

It can be lonely as an entrepreneur in tough times. So managers who have garnered the support of a sound Supervisory Board - including, for example, private equity professionals or others with experience from other markets or companies - will find themselves with a head start. Another clear indicator of future resilience will lie in senior management. The companies that will best weather the coming storms have already set in place a diverse and complementary top team, each with an entrepreneurial mindset, adhering to clear decision processes while also displaying an autonomous sense of initiative.

A third green light will be in the quality of an SME’s financial backing. The support of a solid shareholder, such as a private equity sponsor, is demonstrably essential to getting through a macro-economic crisis, not simply because of the all-important immediate access to money, but also because it ensures a certain stability, and can open the doors to new financing solutions.

These include direct lending vehicles, such as unitranche debt, which provide companies with a flexible solution and financing partners. The attractiveness of unitranche debt in particular can be seen by its growing market share: last year about 60% of the SME transactions supported by private equity were financed via unitranche or similar products.

 

A wave of market consolidation in view?

Looking ahead, there is understandably some expectation that the impact of today’s tough times will precipitate a wave of consolidation among SMEs across Europe.

Certainly, many entrepreneurs have understood that being too small in the face of such headwinds is a challenge, and even a liability. This isn’t necessarily new. Many reached the same conclusion after the financial crisis of 2008 and haven’t forgotten that lesson. As a result, partnering with peers is high on the agenda of most ambitious SMEs.

For some it’s a question of forging partnerships, but there is also a real impetus for business leaders to think more proactively about mergers & acquisitions. The clear goal for any SME looking to join forces with a similarly sized competitor, is that their newly-merged company should retain the agility and entrepreneurial mindset that each partner previously enjoyed on its own.

A bigger footprint allows entrepreneurs to reach beyond their home market, tackling new territories, winning new clients, and present new business opportunities. Therefore, the combination of two like-minded players can boost resilience and open the path to additional growth through new products and services, including upselling and cross-selling opportunities. The big ambition that should be driving any SME today is the dream of emerging from the current turmoil as a European champion, providing a springboard for the next phase of development in international markets from Asia to America, offering real opportunities to expand.

While no entrepreneur should willingly surrender that long-term goal, the immediate task to hand for businesses and their backers will be to navigate the next year. For that, nothing can replace sound governance, disciplined management, and professional shareholders able to bring their experience, their knowledge, their networks and their resources to the table to ensure long-term success.

À lire aussi

Vignette
Eurazeoviews2-Flak-Teisseire

19/09/2023 - TRIBUNE

The era of the adaptation economy, and the need for a common ESG benchmark

4 min

Vignette
Eurazeoviews2-Girard-morin

19/09/2023 - TRIBUNE

Making the most of ESG reporting

4 min

Vignette
Eurazeoviews-lambry-makaya

19/09/2023 - TRIBUNE

Towards a cleaner, more sustainable shipping industry

3 min

Vignette
Eurazeoviews2-Mombert-Sesboue-Meignen

19/09/2023 - TRIBUNE

A promising future for Tech M&A

5 min

Vignette
Eurazeoviews2-Cohen Devillard

19/09/2023 - TRIBUNE

Decarbonising cities: the New Electricity Era

6 min

Vignette
Eurazeoviews Orsi - Cassam - Lariviere - Zins

19/09/2023 - TRIBUNE

The revolution in the healthcare sector

5 min

Image
eurazeoviews-2-doat-bertay-debock

19/09/2023 - TRIBUNE

Responsibly addressing the opportunities of Gen AI

5 min

Vignette
Eurazeoviews-agathe-bubbe

19/09/2023 - TRIBUNE

Democratization of private equity: the way forward

4 min

Vignette
visuel Virginie Morgon

25/01/2023 - TRIBUNE

Responsible investing – a powerful tool for better growth (version anglaise)

6 min

Vignette
Tribune Sophie Flak zoé Fabian

26/01/2023 - TRIBUNE

Europe’s sustainable tech sector draws intense investor interest (version anglaise)

3 min

Vignette
Christophe Bavière Tribune

26/01/2023 - TRIBUNE

After the euphoria: Eurazeo's strengths in a challenging market (version anglaise)

5 min

Vignette
Eurazeo views tribune décarbonisation

26/01/2023 - TRIBUNE

Why is Europe ahead in decarbonizing the economy? (version anglaise)

5 min

Vignette
Eurazeo views brands

26/01/2023 - TRIBUNE

Brands’ social and environmental responsibility: illusion or reality? (version anglaise)

5 min

Vignette
Eurazeo views Christophe Simon

26/01/2023 - TRIBUNE

The rise of GP-led transactions (version anglaise)

4 min

Vignette
Eurazeo views tribune 4

26/01/2023 - TRIBUNE

Private debt: an investment partner even in challenging economic times (version anglaise)

4 min

Vignette
Eurazeo views vignette 3

26/01/2023 - TRIBUNE

Biotechs, the ultimate post-pandemic winners? (version anglaise)

5 min

Vignette
visuel tribune eurazeo views 1

26/01/2023 - TRIBUNE

European sovereignty: myth or reality? (version anglaise)

4 min

Vignette
Tribune Caroline Hadrbolec

16/11/2022 - TRIBUNE

Féminisation des métiers : la parité, accélérateur de performance

5 min

Image
Image - tribune on democratizing private equity by Virginie Morgon

08/11/2022 - TRIBUNE

Démocratisation : la nouvelle frontière à franchir pour le private equity

5 min

Vignette
visuel Virginie Morgon

30/09/2022 - TRIBUNE

L’avènement des plateformes de marchés privés

4 min

Vignette
Vignette Laurent Chatelin

22/09/2022 - TRIBUNE

Les infrastructures au cœur de la transition écologique

4 min

Vignette
Visuel Sophie Flak

16/06/2021 - TRIBUNE

NFRD, CFRD, SFRD, Taxonomie … kesako ?

6 min

Image
Tribune Virginie Morgon

02/06/2021 - TRIBUNE

Une nouvelle identité pour une nouvelle ambition

4 min

Vignette
Tribune Mathieu Baret

24/12/2020 - TRIBUNE

Agir pour le climat : ce que les investisseurs peuvent faire

4 min

Image
Tribune Sophie Flak

28/04/2021 - TRIBUNE

The Reason Why

2 min

Vignette
visuel Virginie Morgon tribune

07/04/2021 - TRIBUNE

Digital health: accélérer les innovations et les investissements (version anglaise)

5 min

Vignette
Visuel Virginie Morgon tribune 2

23/03/2021 - TRIBUNE

Le moment pour le private Equity est maintenant (version anglaise)

4 min

Vignette
Tribune Caroline Hadrbolec

08/03/2021 - TRIBUNE

Garantir un milieu de travail véritablement inclusif est la clé pour former les femmes vers le sommet

2 min

Vignette
Tribune Virginie Morgon

10/11/2020 - TRIBUNE

Une vue générale sur les challenges et opportunités du marché privés (version anglaise)

3 min

Vignette
visuel Virginie Morgon

30/09/2020 - TRIBUNE

Présentation du nouveau programme RSE pour les 20 prochaines années, O+ (version anglaise)

3 min

Vignette
visuel Virginie Morgon tribune

02/09/2020 - TRIBUNE

Stabilité et réactivité en temps de crise & dans quelle direction irons-nous après (version anglaise)

5 min

Vignette
Tribune Marc Frappier

04/06/2020 - TRIBUNE

Résumé sur la Chine (version anglaise)

4 min

Vignette
Visuel Virginie Morgon tribune 2

03/04/2020 - TRIBUNE

La solidarité nous donne de l'espoir face à la pandémie de Covid-19 (Version Anglaise)

2 min

Vignette
Tribune Benoist Grossmann

16/12/2019 - TRIBUNE

Encourager l’entreprenariat au féminin : 5 conseils pour réussir sa levée de fonds

5 min

Vignette
Tribune Virginie Morgon

15/08/2019 - TRIBUNE

L’évolution de l’économie globale a diversifié l’industrie du capital investissement (version anglaise)

4 min

Vignette
visuel Virginie Morgon

23/04/2019 - TRIBUNE

Diversification audacieuse : Un nouveau standard pour promouvoir la longevité et la prospérité (version anglaise)

3 min

Vignette
Visuel Virginie Morgon tribune 2

04/03/2019 - TRIBUNE

Un challenge audacieux pour le Private equity (Version Anglaise)

3 min

Vignette
visuel Virginie Morgon tribune

30/01/2019 - TRIBUNE

Comment le Private Equity conduit le changement dans le commerce de détail (version anglaise)

3 min

Alerte vigilance

Tentatives de fraude et d'usurpation d'identité