From growth in size to a boost in productivity

Il presidente e senior partner di Gea

Tito Zavanella

Gea has identified a positive correlation between company size and business performance across individual sectors (with the fashion and food sectors analysed in detail), as well as across a cross-sectional sample. The survey, carried out amongst a sample of nearly 140 companies, highlights, for example, that the highest growth rates over the last five years have mainly favoured the ‘big players’: in nearly six out of ten cases, those reporting stable revenue are micro, small or medium-sized enterprises (fewer than 50 employees), whilst, conversely, among those reporting growth of over 20 per cent, seven out of ten belong to the larger size categories.

This growth is often achieved through a combination of approaches: 37 per cent of those experiencing growth do so through a combination of organic growth and acquisitions, and – as the survey also reveals – those who make successful acquisitions rarely do so just once.

Managing organisational change, attracting and retaining talent, managerial oversight of growth, the scalability of operational processes, and regulatory and tax complexities are the main obstacles faced by those who have focused on organic growth, whilst those pursuing external growth strategies encounter different challenges. First and foremost (and obviously) is the identification of targets, followed by the integration of information systems, execution times, post-transaction managerial oversight, and the cultural and managerial integration of the target. For M&A transactions to be successful, the factors considered most important are strategic clarity, the quality of management, the ability to execute, and financial and capital strength.

“One important aspect concerns the consequences of scaling up,” explains Zavanella, “because complexities generally grow faster than turnover. Financial resources are certainly needed for growth, but companies’ responses highlight that the critical issue is that of managerial resources. And this is where significant changes are required, particularly in family-run businesses, where it is unthinkable that decision-making should continue to rely solely on the entrepreneur.”

This growth can take place organically or through acquisitions, perhaps by opening up the company to investors to secure the necessary resources. This is a path to be pursued without preconceptions, but in a considered manner.

‘I believe it is a mistake to forgo growth simply to avoid opening up the company to outside investors, but it must be said that even in the world of finance there are different models, with their pros and cons, and so the choice of partner must be carefully considered. One must look not only at the financial resources that are brought to the table, but also at the expertise, the rigour of processes, and the network of contacts that will become accessible.”