In a recent study, Business Without Borders International Growth at Mid-Cap Companies, Mergermarket and Mazars have reported that most mid-market companies are looking at ways of driving growth through expansion into new international markets rather than growing domestically. The study analyzed the opinions of over one hundred senior corporate decision makers (CEO, COO, CFO or Head of Strategy) at global mid-market firms, including Canadian players, to discover which markets and regions they are targeting, where they are already achieving success and how they intend to finance their international growth plans.
The report suggests that mid-cap companies worldwide experienced a strong end to 2014. In the increasingly globalized world, most of these players are looking at ways of growing through expansion into new international markets. Approximately one half of respondents already generate more than 50% of their revenues internationally, and around the same number of players already operate in more than 10 international markets. Half of those polled also plan to make an acquisition in the next three years thus becoming one of the driving forces behind global M&A activity in the near future.
The report also reveals that mid-market companies consider Asia as a particularly attractive market for growth, with respondents in EMEA, the Americas and Asia all most likely to cite countries in this region as ones where they are most likely to set their foot in. India and Australia were also suggested as hotspots for future investment by the respondents. The respondents also noted that expansion into Asia would likely bring challenges, stating that Asian markets are one of the most difficult in which to operate.
In terms of financing international growth, 58% of mid-market companies surveyed are likely to use bank debt to fund overseas expansion, with 56% looking to internal profits and 31% to investment from private equity or venture capital. This may signal a trend of returning to bank financing following the opposite trend in favour of alternative lenders seen during the last financial crisis. However, the report also cautions that some reluctance to make more use of the financing opportunities afforded by global capital markets could result in restricted levels of growth for those companies that are unwilling or unable to tap the additional financing available through bond end equity instruments.