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Medium-sized companies start growing again, study says

by Paolo Bricco

Nothing to complain about for 2014. And this year looks good too for Italy's medium-sized companies.

In fact, in 2014, for the first time since 2008, the number of companies with rising revenue outnumbered the ones whose sales fell: 45.2% versus 27%, according to an annual report on mid-sized Italian companies issued by Mediobanca. That's a positive spread of 18.2%. Something - and not just a little something - is on the move.

Production was also up last year, by the way. And after five full months of 2015, owners of the 3,212 mid-sized businesses polled by Mediobanca are optimistic: 46.3% of them see higher revenue and 42.6% anticipate rising production. So the worst of the three-year recession seems to be over, in terms of both valuations and perceptions, for this segment of the Italian economy, which makes up 16% of the added value of our industrial manufacturing and 17% of Italian exports.

According to the study, mid-sized companies around the world have some similarities. But here, at the same time, they are also defined by certain profoundly Italian elements: the stock market isn't a real strategic option, for one, and there's a heavy dependence on bank credit. More structured financing, corporate bonds for example, is still not widespread.

While this might be out of line with the economic and corporate mainstream, is jives with the traditions and historical evolution of our nation.

One of the most interesting aspects of the study is its comparison of international expansion.
In particular, an analysis of the period 2005-2013 shows both the interest of foreign players in mid-sized Italian companies, and, at the same time, the reluctance of Italian players to acquire businesses abroad. Specifically, mid-sized Italian companies acquired only 40 foreign companies during that period. But foreign buyers snapped up 126 Italian companies. That's a ratio of 1 to 3.

Is the imbalance due to the extremely attractive qualities of our manufacturing system, or to a strategic timidity in this area on the part of what is otherwise the most aggressive and efficient segment of Italian capitalism?

A tax cut included in the 2015 budget will save companies almost half a billion euros on IRAP: €460 million to be precise. For the three year period 2015-2017, that works out to €1.4 billion less in taxes paid - 12% of the €11 billion reduction calculated by the government. That savings could mean 11,450 more jobs; or a 7% increase in annual investment; or a 19% hike in annual profit - which could lead to a 9% increase in the collective capital base.