Cyprus’ Economy and Competitiveness Council says government encouragement is required to enable more company acquisitions and mergers to improve productivity and robustness.
According to recommendations issued by the advisory body, the aim is to create larger companies that could take advantage of economies of scale and become more productive and competitive, attract specialised personnel, and become more resilient.
“The change of culture for the promotion of acquisitions and mergers, as well as the provision of incentives in this direction, are issues the government should consider”, the Council points out.
It said micro-firms and small firms face barriers to finance access and need help innovating or creating an integrated strategy to export and compete in the international economic environment.
Some 92.9% of businesses are classified as very small, with up to 9 employees and 6.1% as small businesses with less than 50 employees.
The Council recommends the creation of an integrated framework of support and culture change regarding the promotion of acquisitions and mergers through the establishment of an Office to inform and guide businesses that wish to consider the possibility.
It also proposes the modernisation of the legal framework for mergers and acquisitions of companies.
“The legal basis for mergers and acquisitions should be consistent with the modern spirit that exists in mature stock markets.”
Also recommended are tax relief and the elimination of burdens, applying tax incentives in the agricultural sector, and subsidies for agricultural equipment and machinery.
According to the proposal, tax reliefs will be applied to companies that employ up to 250 workers with an annual turnover that does not exceed €50 mln.
It also proposes the provision of specialised advisory services for companies intending to merge through the Advisory Services Plan of the Ministry of Energy, Trade and Industry and facilitating access to financing.
“Mergers and acquisitions in Cyprus are at very low levels, as most of the businesses are family run in traditional sectors – where there is no culture of mergers to expand businesses.
“The new Long-Term Strategy for the sustainable development of Cyprus proposes a new model until 2035 and sets as an important pillar the improvement of the competitiveness and productivity of Cypriot businesses and the shift towards exports through digitalisation and continuous training.
“Achieving this goal requires larger enterprise sizes that can respond to changing market conditions and survive in a globalised environment.”