The Shakespearian Dilemma of European Companies: To Be Small Or To Be Large?
O texto a seguir é um extrato da apresentação feita pelo presidente da TEH Ambrosetti, Valerio de Molli, na abertura da edição 2016 do workshop “The Outlook for the Economy and Finance”, na Italia. Embora focado no ambiente de negócios europeu (e italiano em particular), ele contém uma série de ideias e conceitos validos também para o Brasil, que precisa urgentemente aumentar e aperfeiçoar seu apoio às empresas de médio porte. O artigo original está disponivel em italiano, bastando nos solicitar através do email email@example.com
The last months have been marked by numerous signs of uncertainty on both a geopolitical and economic level, and there is no indication that these will diminish. Let me mention at least seven:
- The rampant threat of terrorism which causes the deaths of innocent people throughout the world. Europe is also the victim of the unforeseeable nature of these attacks. Between 2015 and 2016, in particular, there has been an intensification of this phenomenon with unacceptable loss of human life, including children.
- In 2015, the number of immigrants arriving in the European Union has exploded, also as a result of the crisis in Syria, exceeding 4 million, four times the number in 2014. It is the highest migratory flow since the second world war to-date. A recent united nations report shows that 60 million people including refugees, those seeking asylum and those who have lost their homes, create a state-less population in the world.
- In June 23rd, Great Britain chose to leave the European Union which is a confirmation that Europe is still very distant from a process of political and social cohesion, and giving credence to the view of Otto von Bismarck that “Europe is a ship of fools”.
- For 2016, the European Central Bank (ECB) has confirmed its aggressive, expansionary monetary policy and, in fact, has “shot its wad” in terms of monetary policy. Nothing more can be done. The “aspirin” has run out. Let’s hope the headache passes soon.
- The FED and fed and ECB budgets have never been so bloated (since 2008, up 3.5 trillion dollars and up 2.5 trillion euros, respectively) and, in Europe, over 1 trillion euros of liquidity is circulating.
- This past February 11th, the price of oil hit its lowest point since 2003, bouncing 47% in four weeks. Today, this instability and unpredictability makes it difficult for all operators to plan investment and business activity.
- The global economy entered 2016 with less impetus than expected and the estimates for growth have been revised downwards a number of times by the main monitoring bodies. According to the OECD, for 2016, estimates for growth worldwide are around 0%, down 3.3% from the previous estimate.
European economies need to meet two important goals in the direction of growth and bolstering small and medium-sized enterprises: a more modern financing policy and stimulus for investment. This scenario raises a question: is having a small company really so good, or is it always a “disaster”?
- Italy has 403,000 small and medium-sized manufacturing companies. As per comparison, France has 207,000, Germany 204,000, Spain 161,000 and the United Kingdom 124,000 companies. While on one hand this undoubtedly represents a point-of-strength, on the other it cannot be denied that the question of “size” impacts on growth.
- Large companies have enhanced performance and greater financial stability. On average, large companies invest 2.8% of their billings, compared to 1.9% in small companies, and they have a capacity to generate value, measured as the ratio between Ebitda and billings, equal to 9.7%, compared with 7.2% in small companies. In addition, large companies:
- Have easier access to financing channels that are alternatives to banks.
- They can support R&D programs for internationalization and growth that are more effective.
- They are able to attract more and better qualified human resources.
In other words, they are more competitive.
- A significant part of the capital invested by Italian companies is tied up in property assets (land and buildings). The book value of these assets for joint-stock companies is over 350 billion euros.
- On an international level, only 21% of the financing sources of Italian companies are equity, behind every other large country in Europe except Spain (17%).
- The bank-centrism of Italian companies (793 billion euros in bank loans in 2015) is extremely high, with 93% of corporate financial debt held by banks, compared with 77% in the United Kingdom and one-third in the USA.
- In Italy, the number of companies involved in aggregations is among the lowest in Europe. Only 1,505 companies in six years, compared with 8,804 in France and 7,100 in Germany
The absolute priority is for the business system to grow rapidly. And the way businessmen think and their vision must also change. Decisive action must also be taken towards a redesigning of the instruments that promote a growth in size and investments in Europe. The cost of doing nothing can be extremely high. Just in Italy, the companies in the sample we recently analyzed (between 10 and 200 million euros in billings) in serious risk of bankruptcy are 2,200, employ 162,000 people and are indebted to an amount of approximately 34 billion euros.
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