28/02/2022
10:59

Grow to compete: between ideas and capital

The goal (and ambition) of every entrepreneur is to increase the size of their company both qualitatively and quantitatively, in order to create wealth for themselves and for all stakeholders.

The path to attain this goal is changing and challenging as it is influenced by a long series of endogenous and exogenous factors that determine the need to continually adapt to the new status quo.

The ways and financial means involved can also vary according to the objectives of the company. Growth can be pursued:
  • through organic development of new products or services, expansion into new outlet markets, increase in production capacity, development of new technologies, etc.: in this case we are talking about organic growth. One of the key elements of this path is the structuring of a solid business plan to which the economic support of structured finance solutions can be added.
  • in a complementary way, through mergers or acquisitions of companies, and with an approach based on external growth. The factors at stake here are even more complex, which is why dedicated consultancy for financial advisory and M&A activities can prove to be of real help.

Benefits and challenges of organic growth and external growth

On the one hand, organic growth guarantees a certain degree of certainty with regard to the methods and quality of the activities involved in development of a new project (e.g. a new product, opening of foreign branches or set-up of a new plant). On the other hand, it often requires access to specific information and skills that are not always immediately available in the company and that could delay execution times.

External growth with mergers and acquisitions (M&A) ensures quicker set-up times, access to specific resources and the possibility of benefiting from synergies at the level of the extended group. However, it could present greater uncertainty regarding the correspondence of the characteristics of the target company, highlighting a gap between those declared before the acquisition and those verified once the operation is concluded.

Whatever the path chosen for the development of your company, the main objective will remain to maximise the benefits and minimise the risks of such complex and extraordinary processes. For this reason, it is essential that the entrepreneur not only have specific knowledge of the industry, but also avail himself of the technical expertise of external consultants and advisors who can support him in activities such as: market analysis, the preparation of a medium-long term business plan, financial, fiscal, legal and environmental due diligence, etc. The advisors will then be involved in the procurement of financial resources and, among other things, in the negotiation of the terms of the acquisition contract (price, declarations and guarantees, etc.). The latter is particularly important, in order to minimise the risks deriving from possible negative “surprises” after acquisition, and not only.

Banca Ifis, through its Corporate & Investment Banking division, provides SMEs and Large Corporate teams specialised in the world of M&A consultancy and financing of structured and extraordinary finance operations to support every type of need and industrial sector.


by
Cataldo Conte
Corporate & Investment Banking Manager
I graduated in Business Administration with a master’s degree in Corporate Finance at SDA Bocconi, and worked with several international banks. At Banca Ifis I have always been involved in financing institutional investors and companies as Structured Finance Manager and, since 2018, as Corporate & Investment Banking Manager.
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