- We are facing a global crisis that affects all continents
- The drop in activity has been sudden. On the contrary, some activities have been overwhelmed by the explosion in demand in sectors such as health, technology, distribution, etc. and have had to adapt to a scenario of exponential growth
- Industrial elements and capacities are intact
- There are financial resources and instruments that are providing liquidity to finance the stoppage (ICOS, etc.) and avoid closures
- Investors maintain their interest in investing in companies (Venture Capital, debt funds, etc.) and new operators are also emerging who see this as an opportunity to buy companies with potential
- There is an enormous desire of people (workers, employers,…) to return to normalcy as soon as possible (even if it is new)
- Governments are taking measures to protect and stimulate the economy in general and industry in particular, which gives hope for recovery: after health comes the time of the economy
It is more than evident that we are coming into very difficult times and that the economy and citizens are going to suffer the consequences of this coronavirus for a long time: 1 or 2 years, namely…
However, from our knowledge this situation is an opportunity to execute pending tasks that reinforce our companies, sectors of activity and generate employment again, making us stronger for the next crisis, which will surely come.
TASKS FOR THE START UP
- WIN SIZE
This is one of the most significant challenges facing industrial companies. Spain is a country of SMEs with a great preponderance of small and micro enterprises.
To refresh some figures, in Spain the average number of workers in companies is 4.7 when in Germany it is 11.7, United Kingdom 11 and France 5.7. In Germany companies with less than 10 employees account for 15.4% of employment and in Spain 24.1% (4 points higher than the European average). Large companies in Spain employ 28.2% of the workforce, six points below the European average. Spain has been warned by the European Commission and the IMF to take measures to encourage the growth of business size in the face of this structural problem.
Much has been said and written about this problem of size but little is being done, either because of a lack of incentives or because of a lack of willingness on the part of business owners/shareholders to assess and decisively tackle the problem.
We certainly think that the current crisis is a moment that should induce entrepreneurs/ shareholders to rethink this challenge.
There are companies in a situation of doubt about their viability that are going to require a solution that is not only financial, but also strategic and managerial. They cannot get ahead on their own.
This situation is particularly aggravated in family businesses in the process of dealing with succession or with a lack thereof and in those with partners with divergent interests and/or lack of medium/long-term vision, which will generate inaction How to give continuity to the company, is a question that must be asked.
There are highly atomized sectors where there is a clear possibility of integration, for example, Tier 2-3 automotive, aeronautics, transport, packaging, etc., where the situation will force the search for efficiency solutions and alliances. How I am more competitive.
2. GO TO PRODUCTS AND SERVICES OF GREATER ADDED VALUE
The industrial fabric of the SMEs is characterized by being oriented towards subcontracting, with high efficiency but lacking its own product and with limited added value.
The crisis situation is a moment that demands a rethinking of the strategy and a review of the company’s positioning with respect to its competitors, analyzing technological trends and seeing emerging markets.
Possibly a refocusing of the business, reinventing itself to move up one step in the value chain and increase added value, will require financial resources and perhaps the search for accompanying partners.
There are many financial instruments, from capital to debt funds with different types and ways of investing, which are highly liquid and willing to participate and get involved in business investment projects that, in combination with traditional financial schemes, can provide the economic resources to carry out this strategy of changing the business model.
3. TECHNOLOGY COMPANIES
This new crisis has come at a time when technology companies born in the boom years were preparing to take the step away from being start-ups and make the leap into the market.
Dealing with financing rounds in order to incorporate resources with which to launch into the market is a complex process both in terms of the volume of resources to be captured and the demands of investors in terms of the quality of the projects.
In the current circumstances of crisis, it has become clear that technology sectors linked to ICTs, communications, health, energy, etc. are a clear reflection of the future and therefore of the interest of both industrial and financial investors. This is an opportunity for those companies with products oriented towards emerging markets to accelerate their development and be able to reach the market in time. The crisis has accelerated the need to advance in the technological field and therefore, an opportunity.
CONCLUSION
We are facing a great challenge, with many difficulties ahead but also with opportunities.
If there is one thing we have learned at IMAP Albia Capital from other crises, it is that we should not wait for someone to come and solve our problems (all help is welcome), but rather be proactive. Let’s diagnose our situation well, reflect on where we want or can go and get started, let’s be proactive.
If there is something positive about this crisis compared to 2008, it is that there are (at least for the moment) financial resources, both bank and non-bank, willing to invest in projects with viability and profitability.
We must consider starting up with prudence and concern in the short term, but with a medium/long-term vision to set the course and emerge strengthened as far as possible.
There will be companies that will disappear, others that will be bought, absorbed or merged (but will continue) and others that will know how to take advantage of the situation and come out stronger.
Therefore, depending on their diagnosis, each one will have to choose its strategy.
Take Care!