Europe and Spain are synonymous with family businesses. In Spain specifically, 99% of the business sector is made up of small and medium-sized enterprises. If we analyze this landscape, we see that it's a fragmented market where many of these companies face uncertainty about what to do with their future.
That's when they face countless situations and challenges when it comes to figuring out how to drive their development. These include:
- Companies that want to, but don't know how (whether because they lack the necessary team or facilities, among other things).
- Companies facing a succession they don't know how to handle.
- Those that don't realize their growth may lie beyond their local area of activity.
But the vast majority have one thing in common: they're unaware of the strategic advantages that a corporate transaction can bring to their growth. They only know the option of organic growth. Or those that are aware of it think it will require greater effort in every respect, both in terms of integration and financially.
Alternatives M&A offers an SME
Faster growth
In the expansion phase, pursuing an acquisition strategy enables faster development and much quicker results (revenue, market share, customer portfolio, etc.) in the short term.
Stronger capabilities
Choosing this route also helps broaden the company's focus to areas or markets that probably weren't contemplated in the business plan at first.
Monetization
In the exit or succession phase, opting for a corporate transaction makes it possible to capitalize on so many years of effort and ensure the continuity of the business.
In addition, there's a preconceived idea that mergers and acquisitions only happen in large or listed companies. The truth is that they're becoming increasingly common in the micro, small, and medium-sized business segment (revenue between €1M and €50M), since these companies are proving more attractive to investors (private equity funds and search funds, as well as strategic buyers).
This is where investors have the opportunity to use their management experience to consolidate highly fragmented industries with companies whose processes aren't optimized, that don't have a strong sales team, or whose management system isn't the most efficient, among other things.
How to get into the world of M&A
Once SMEs have chosen the organic route, they can find in technology the perfect ally to connect with private equity or a strategic partner, thereby increasing their visibility and accelerating their growth. This way, companies will not only receive the financial component, but will also get help professionalizing their management, allowing them to grow from small to medium-sized and, in turn, from medium-sized to large.
In addition, private equity is an ideal alternative to traditional financing when the company can't or doesn't want to raise capital through banks and is looking to take a qualitative leap with more than just money.
The pandemic brought with it the need for companies to look for online alternatives and adapt to the new reality of connecting with the market so as not to fall behind. It's precisely in the SME segment where the first obstacles to this new need appear, and where companies run into their widespread lack of knowledge about the sale process, in which a company should feel fully guided.
Considering bringing a partner into the company to help it progress in this area, or even acquiring a smaller company, is something many SMEs don't consider because they don't know how to get there through M&A.
There's no doubt that real educational work is needed today, and efforts must be combined so that these companies consider this alternative in their plans.
M&A as a source of value for the company
Any company, large or small, can find in M&A a perfect option for growth and strengthening, either creating even more value for the company or ensuring it ends up in the best hands.
Spain's highly fragmented SME market currently offers countless opportunities both for investors looking to partner with these companies and for SMEs looking to secure their continuity or consolidate their position in their industry and benefit from an acquisition strategy.
