Let's put some data on the table about the survival of SMEs in Spain to understand why bringing a new partner into a company's shareholder base matters:
- The life expectancy of companies with employees is 7.4 years, and 13.9 years for those that are more than a decade old, according to a report by CEIM and the Instituto de Estudios Económicos.
- Only 3 out of 10 family businesses survive the transition to the second generation, according to the Instituto de Empresa Familiar (IEF).
- 61.5% of new companies don't make it past five years, according to Cepyme.
These figures highlight the importance of finding forward-looking solutions, which do exist, to ensure business continuity, especially in a country like Spain, where 99% of the business landscape is made up of SMEs and more than a third are family businesses. In many of the cases above, business failure is caused by a lack of scale.
In addition to organic growth, there are other alternative ways to gain scale through mergers and acquisitions (M&A) or by bringing a new partner, whether strategic or financial, into the shareholder base, which offers up to seven advantages:
- Accelerated growth
Corporate moves, whether they result from M&A deals or from bringing in a new shareholder, make it possible to grow faster than through organic growth. They bring a fresh capital injection and/or a complementary offering, which we detail in the following advantages.
- Financial muscle
New capital helps finance new initiatives or projects the company couldn't take on before. In addition, a capital increase improves the company's liquidity and financial solvency, which in turn opens the door to new sources of financing. And if the newcomer is a strategic partner, it can complement the product or service offering, adding more value or diversifying the business.
- New outlooks
An open mind, a new corporate culture, diversification, expansion… A new partner undoubtedly brings a breath of fresh air that makes it possible to consider growth paths not previously contemplated and/or manage the business differently. They can also bring new contacts, among suppliers, customers, and investors, that can help the company grow and expand. At the same time, a new partner can bring skills and knowledge in areas such as finance, marketing, or technology, which also contributes to growth.
- Improved productivity
Another advantage of bringing in a new partner is the ability to delegate and redistribute the workload, which also helps reduce stress. This makes it possible to focus on other higher-value levers that drive innovation and business growth, whether through new products or services or through efficiency and productivity gains.
- Risk diversification
When there's more than one partner, the risk is shared among the shareholders. This helps reduce the risk of financial loss if something goes wrong at the company and makes it easier to weather setbacks.
- Succession
The lack of a successor is one of the major problems facing much of the business landscape, not only in Spain but across Europe, where SMEs account for 60% of GDP, according to the ECB. Bringing a new partner into the company's capital solves this problem, which will grow in Spain as the baby boom generation reaches retirement age, a generation that produced many business owners who will retire from 2030 onward. Another figure: more than 70% of these family businesses have no succession plan, according to the IEF.
- Digitalization
A new partner is often brought in to act as a catalyst in a key area for any company: digitalization. This lever, built into every new company from the start, can be greatly improved with the arrival of a shareholder who contributes expertise in digitalization and/or covers the company's weaknesses in this area.
In short, bringing in a new partner offers a company a wide range of benefits, not only in terms of competitiveness and productivity, but also in terms of consolidation and succession.
At Deale, we've already connected more than 1,500 SMEs with investors to provide them with a business solution. Find out on our website how we can put you in touch with some of our more than 1,000 registered investors so you can benefit from these advantages.
