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The Importance of growth in SMEs

Posted on 14 Sep 2016 by Alexis Outram - Corporate Finance

There is little argument that the UK’s small and medium-sized enterprises (SMEs) will play a crucial role in the recovery of the UK economy. Many SMEs have growth potential, but since the banking crisis have found previous funding routes all but blocked.

Together, the UK’s 5.4 million SMEs, (businesses with fewer than 250 employees and an annual turnover of less than £50m), employ more than 15 million people. Three-quarters of all new jobs created in the UK are created in SMEs and hence they play a key role in the country’s economic development. Yet a recent government report suggests UK SMEs could be facing a funding gap of £22bn by 2017.

Merger & Acquisition is a very important way for companies to grow and change, by moving into new sectors and countries, developing new services, integrating complementary technology and know-how, investing surplus cash, creating jobs and increasing value for shareholders. Corporate finance knowledge and skills, including transaction and advisory services, are increasingly in demand across many areas of business, the economy and the public and private sectors. Corporate finance ranges from raising start-up and venture capital, to growth capital, to Merger & Acquisition, Disposals, Management Buy Outs, equity capital markets/IPOs, raising debt and alternative finance, capital for specialist investment funds, to infrastructure finance and turnaround finance.

Raising the right finance in the right way at the right time is a vital aspect of entrepreneurship, innovation and development for companies. Successful corporate finance also requires long-term planning to optimise capital structures, finance new projects and deals, and to transform businesses.  There is an important public interest and significant social benefit in corporate finance for business innovation. In order to engage with new markets, new technology, new deals and new ventures, companies need to access equity capital, debt and alternative finance. Expert corporate finance advice adds value by providing the flexibility and know-how that companies need so they can adapt to changing commercial circumstances. This includes taking a global perspective on business and exploring international commercial opportunities as they appear on the horizon.

What is important is that owners of SMEs have a strategy to grow or a succession plan in place and seek professional advice at a very early stage before embarking on the implementation of their strategy. A wrong move very early on in the process could be very costly and should be avoided at all costs. It’s also true to say that two heads are better than one and you want to get it right, don’t you ?

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