Why small to mid-market companies?
Small to mid-market companies consider access to finance as the second most severe obstacle to improving performance. Because they lack scale, these companies suffer more from lack of finance than larger ones, but they tend to also grow comparatively faster if they do get it.
Many investors “…may conceivably be right about the emerging markets growth thesis, yet fail to capture much of this growth due to holding mainly large multinationals that simply happen to be based in emerging markets… Many of the most compelling opportunities are to be found elsewhere.”
– Cambridge Associates, The Case for Diversified Emerging Markets Exposure 2011
Small to mid-market companies:
- There is a large number of them, offering significant choice to willing investors
- Tend to have a proven business model, generating revenue and are generally profitable
- Generally provide greater variety of opportunities and allow for better diversification across sectors
- Usually are less able to raise capital from alternative sources and potentially allow for lower entry multiples