Curiously, unconscious biases show us how necessary a constructive and timely vision of events, whether global or domestic, is sometimes necessary. In terms of business strategy, when a threat becomes a reality, we analyze it as a materialized risk and if said circumstance was not anticipated and also has enormous proportions, we call it a “black swan.”
However, in the opposite sense, when an opportunity materializes and is also of enormous proportions, we do not distinguish it as a black swan or with any other term. Whether we call them that or not, there are “positive” black swans.
What if we called them white swans? A white swan would have a positive and transformative impact on companies, countries or regions and their citizens. That said, and despite the current different geopolitical circumstances, it is likely that one of those white swans is passing close to home, both for the technology sector and for the economy in general. Let’s elaborate.
Let’s talk about market sentiment first. According to the latest CEO Outlook prepared by KPMG in 2023, which outlines the agenda and priorities of CEOs for the following year, digitalization is one of the five big topics within their priorities, and 70% of Spanish CEOs consider AI a priority for the company in terms of investment. Without a doubt, corporate strategy and technology were once disjointed sets that are now beginning to touch each other and materialize in specific strategies and investments in a generalized manner.
Secondly, let’s talk about the transversal impact of technology in all productive sectors. In a recent study by McKinsey&Co, which analyzed leading companies in the United States and Europe, it was concluded that European companies have a 20% lower ROI, grow 40% less and invest 40% less in R&D than their North American counterparts. .
This report stated that between 60% and 90% of this gap is due to the strength and maturity of its technology sector compared to the European one. This is a clear call to action to the technology sector of our continent. Let’s now look at the Spanish technology sector to begin to glimpse the white swan.
What is most striking is its enormous degree of atomization, which entails a high degree of immaturity. In Spain alone there are 39,574 technology companies registered according to the latest data from the INE.
What a priori might seem like positive data contrasts with the data on the total number of employees of these companies, a total of 290,240 people. This means an average of 7.33 employees per company. If we take into consideration that the first 20 companies in the sector employ around 150,000 people, the rest of the companies would be employing 3.5 people on average.
Is this a phenomenon common to other business sectors in Spain? Yes, but the transversal and multiplier effect that the technology sector has on the others means that this data should be part of the real “country agenda” as part of its industrial and digitalization strategy for the coming years. And this is where we find the great opportunity, our white swan.
The technological explosion experienced in recent years thanks to the cloud, the big data or Artificial intelligence, plus the need for digitalization, plus the transversal impact on all sectors, means that the first page of the strategic plan of any technology company in Spain should be the articulation of its M&A strategy.
And that famous phrase from James Carville, campaign advisor to Bill Clinton in 1992 in his campaign against George Bush Jr., makes more sense than ever as an opportunity to create value in the Spanish technology sector.
This is about concentration! M&A activity is no longer an activity of large multinationals, and is beginning to be on the agenda of medium-sized companies with ambitions for rapid growth, vision… and strategy.
To carry out a successful M&A activity, as in any business field, thinking, strategy and resources for execution are necessary. An exercise of geographic concentration (competitors in a region), market concentration (competitors in a sector), integration in the value chain or many other types can be carried out, where the associated benefits and risks are both in the short term, like in the middle and the long.
Achieving scale, improving margins, improving the relative position in the value chain or the ability to reach new customers are clear benefits.
Let us now take the thesis of market concentration and M&A activity carried out by medium-sized companies from theory to practice. To illustrate it, three paradigmatic cases in the Spanish market.
The first, that of Gigas, a company listed on the BME Growth, which thanks to its inorganic strategy and the decision to include relevant financial partners in its shareholding, has gone from just over one million euros in turnover in 2013 to 67 .7 million euros in 2023.
Along the way, acquisitions in Spain, Portugal or Ireland. A second success story, that of Izertis, also listed on BME Growth, which through a successful combination of organic and inorganic strategy has gone from just over two million euros in turnover in 2013 to more than 121 million euros. in 2023.
And lastly, a bold case of inorganic strategy such as that of Nunsys, which through an initial geographical integration, has managed to grow from just over 2 million euros of revenue in 2013, to a closing in 2023 above 225 million euros.
Good news in the race towards maturity of our technology sector. Having analyzed all these factors: market sentiment, maturity of the technology sector, and adoption by all sectors, could we be ahead of the Spanish white swan, which would be combining greater maturity and concentration of the technology sector in Spain, with greater permeability and technological adoption by the rest of the sectors?
With all this, would it be a dream to be able to get closer to the United States in its key indicators during this decade? And by the way, isn’t this all part of the strategic agenda proposed by the Draghi report?
#Technologies #consolidation #Draghi #knew #it..
