As Europe’s economies continue to search for a path to sustainable growth, much of the debate has focused on the role that small and big businesses play in the economic recovery. Policymakers have looked closely at the role played by start-ups, business angels and SMEs and at the contribution that larger firms, with significant corporate capital behind them, can play. These have an important contribution to offer but the answer lies partly with the mid–market – Europe’s real economy strongman.
Experience shows us that we should not define middle-market companies purely on factors like employee numbers and turnover (which are ultimately pretty arbitrary). We should also recognise that they share some core characteristics. They have owners with a strong sense of personal responsibility, they are export-oriented with a global reach, they focus on innovation and the long term and they use modern management techniques.
If Europe wants to find a path to growth, focusing more on middle-market companies is the right way forward. During the financial downturn, mid-market companies created 200,000 jobs in Europe’s four largest economies. Mid-market businesses make up for 1.5% of companies in Europe’s four largest economies, yet account for 32% of their private sector workforce. The mid-market contributed €1.1 trillion to the GDP of Germany, France, Italy and UK. If the mid-market sectors of these four economies were a country, it would be one of the top 10 economies in the world.
Mid-market companies have an important role to play in the region’s economic recovery but they need backing to prosper. What they sometimes lack are the operational expertise and access to capital. Here private equity has a driving role to play; its philosophy of active engagement is a good fit for middle-market companies, which need operational expertise, capital and patient ownership to grow.
To learn more, please check out our new EVCA Briefing: The middle-market: Europe’s real economy strongman and have a look at our report “Delivering the goods”.
We will also be considering these issues in more detail at an event being held on 10 July in Brussels. For more information about this event please visit here.