Real economy and business. The tools to grow SMEs
It is known that the Italian economic and entrepreneurial fabric is closely related to the reality of small and medium-sized enterprises.
Nevertheless, reality presents us with new challenges.
These realities are becoming, so to speak, too small to keep up with the times and generate more profitability, turnover, and earnings, with repercussions on the entrepreneur, on the modernization of the company, on the ability to compete increasingly on foreign markets, on employment.
We have productions of excellence, there is nothing to learn from anyone, the world is watching us.
In this context, the problem arises of how and whether to grow.
It is obvious that the more a company grows, the more there will be highly positive returns. The consequence of what has been written is the creation of new wealth.
How can the real economy meet the business world?
I talked about small and medium-sized enterprises, the central point of this brief analysis. But this does not exclude large companies.
We must talk about the so-called extraordinary finance operations and funds, completely autonomous from any other entity, which collect immense amounts of investments from all over the world, to then operate in favor of Italian companies, in various forms.
Through the mechanism of private equity and other instruments, the fund enters the company’s share capital, normally, but not necessarily, with a majority participation. Each case is unique.
When it comes to finance, many think of a world of sharks, where the law of the strongest prevails.
Even on the internet, you can find interventions and articles on the pros and cons of fund interventions or extraordinary finance operations, rather bizarre and not corresponding to reality.
What I’m telling and carrying forward is a completely different reality, moreover listed on the Milan Stock Exchange and subject to severe controls.
It’s about protecting the Italian-ness of companies and, as I said, increasing their profitability, turnover, and the value of participations.
Italian entrepreneurs are very suspicious when it comes to extraordinary operations and the entrance of a new funding partner.
They think they will lose control of their “creature”, which they may have founded personally, without having inherited it, and that someone, the fund, wants to enter the partnership to take control in someone else’s house.
This is a completely wrong vision, which is very difficult to correct. The banking system is obsolete.
A possible bank loan, for example, aimed at modernizing the company with new plants, immediately creates a debt, which must be repaid.
The entry of a new partner does not create any debt for the entrepreneur and the company.
Normally the entry operation occurs, for joint-stock companies, through the issuance of new shares, which are purchased by the fund.
For limited liability companies, a capital increase is carried out, which the fund subscribes to, together with the entrepreneur.
Normally, if the fund acquires a majority stake, this is never more than sixty percent. You stay together, normally, five years, then the fund exits.
The ideal goal would be to take the company public.
But the final choice is up to the entrepreneur, always supported, even in consulting towards the exit, by the fund.
It is obvious that the fund, using third party investments, must necessarily increase turnover, profitability, and the value of participations.
But this does not happen unilaterally, because at the moment the value of the fund’s participations increases, the same effect occurs on those of the entrepreneur.
The same consideration applies to the increase in turnover, which remains with the company.
The fund provides fresh money, for all those investments that allow the company to become larger.
We can no longer be satisfied with the position we have reached.
We must look forward, and this also applies to all those realities in which succession problems arise at the top of the company.
Management remains entirely with the entrepreneur.
The fund only intervenes in controlling finance, from which tax advice derives, in a subject that changes with unacceptable frequency.
Obviously, if anomalies are found, from a financial point of view, resulting from waste or management losses, as an example, the fund intervenes.
Then, if there are needs aimed at finding new managerial figures, the fund is open to any consulting activity.
All relations are regulated by shareholders’ agreements, to guarantee the position of the fund and the entrepreneur, who must walk side by side, without overlapping competencies. The progress of small and medium-sized enterprises, through private finance, where ethics prevail, the protection of Italian-ness, as I have already mentioned, very thorough analysis, is the tool to face new challenges and anticipate times.
The sectors I call merchandising, of reference, are the most diverse.
We can say that, without forgetting tradition, there is a lot of space entrusted to creativity. The important thing is that the company has good profitability and is consequently capable of creating new ones.
This is a mandatory path, when you choose to be assisted by an investor.
In extraordinary finance, multiple forms of action are included, among which mergers and acquisitions.
Companies in temporary economic difficulty can also be helped. But this topic will be an occasion for further study.
I have been asked why a lawyer deals with extraordinary finance, which seems relegated to the activity of financial consultants.
The answer is simple.
I have always dealt with business, broadly. I deeply love my country and all its people.
Law regulates every form of action, even in the economic and entrepreneurial sector.
I have chosen to contribute to the growth of our companies, as well as the economic and social growth of our country.
Author: Claudio Gandini
Iscritto all’Ordine degli avvocati di Milano e patrocinante presso le giurisdizioni superiori ed a quelle dell’Unione Europea. Svolge attività in materia di consulenza d’impresa.
