When it comes to inorganic growth, France’s small and medium-sized companies are extremely dynamic. A study carried out by BPI France and published in September 2022 reveals that, over the last five years, 81% of directors have considered buying a company, while 34% have actually made an acquisition. Experts at AURIS Finance, a merger and acquisition consultancy, explain.
After a particularly dynamic 2021, the M&A market ground to a halt in the first half of 2022, with the number of transactions falling by 42% year-on-year globally, according to figures published by Refinitiv. Uncertain global economic conditions and tighter access to financing have made buyers more cautious. This decline in transactions has particularly affected very large deals. For SMEs, however, the appetite for inorganic growth operations does not appear to be waning.
Major ambitions for growth
The BPI France study “Inorganic growth in SMEs” reveals that eight out of ten business executives have considered acquiring a company in the last five years. What’s more, a very large majority (83%) believe that an acquisition will help their company survive in the long term. Sixty-five per cent even believe that acquiring companies is essential to their development. However, the desire to buy is not always followed by action. In the last five years, only a third of SMEs have actually made an acquisition.
Many obstacles remain
Although they are tempted by the idea of making an acquisition, company managers are cautious. In fact, 47% of them say they have given up on making an acquisition because of the scale of the task. Among the reasons given: lack of time and lack of in-house skills are the most commonly cited. Despite a relatively low average transaction value (55% of deals do not exceed €1 million), managers remain very demanding when it comes to the smooth running of the transaction. There is no question of bypassing the due diligence phase, nor of rushing past a discussion of possible synergies between the two entities by drawing up a business plan. When considering an acquisition, the managers of small and medium-sized companies adopt the same reflexes as industry experts. However, they are less inclined to seek professional support.
New transactions on the horizon
The number of transactions is set to accelerate over the next few years, driven by the retirement of baby boomer entrepreneurs. Nearly one in two owners plan to sell their business in the next five years. These sellers also have high expectations. They want to increase the value of their business at a market price, while securing its long-term future.
Get the support you need
In a dynamic but cautious market, any sale or acquisition requires careful consideration. This is an essential step in assessing the company’s strengths and weaknesses, and analysing its position in the market and macroeconomic environment. Throughout this process, the experts at AURIS Finance are at your side. We can advise you at any stage of your project, taking into account the issues specific to the size of your company and the sector in which you operate.
