The government will this week publish its legal proposal for promoting mergers and acquisitions among enterprises, in order to change the landscape of Greek entrepreneurship that is dominated by small and very small enterprises that have limited access to credit and with small productivity.
This regulation is related to the loans from the Next Generation EU package, as the development of economies of scale through M&As is one of the eligibility criteria for the issue of European Union-subsidized credit. The interest for those loans is estimated at 0.35%, as things stand, which clearly constitutes an incentive for companies interested.
The loans may cover 30% for existing partnerships and 40% of investment plans by new partnerships. The remainder will be covered via own capital and bank credit whose interest rates currently range around 2% for large enterprises and up to 6% for smaller ones.
Consequently, with the EU package’s loans, the average cost of borrowing for merging enterprises will be similar to what most of their European peers pay for their loans, while in the case of small companies it will be even lower, Finance Ministry officials argue.
There will also be some tax incentives, led by the 30% reduction of corporate earnings tax for the first three years. The capital concentration tax will also be halved, from 1% to 0.5%. Personal enterprises cooperating with others to create a new entity will also secure more favorable taxation.
Crucially, the new legal framework will also provide for criteria for cooperation to be genuine: The turnover of the merged enterprises must amount to at least 50% more than that of the biggest partner. This should discourage the absorption of one very small company by a large one. It would make more sense for a large firm to buy out many small ones, or to have two similar companies merge.
Cooperation will have to last for at least five years and concern a minimum of 20% of the turnover of the companies’ cooperation in case they also have other fields of activity.