Cyprus is stepping up efforts to encourage mergers and acquisitions among small and medium-sized enterprises, aiming to unlock growth, competitiveness and innovation across key sectors.
Speaking at a conference organised by the Cyprus Chamber of Commerce and Industry (Keve) in collaboration with Hellenic Bank, Finance Minister Makis Keravnos presented the government’s dedicated action plan, approved by the Council of Ministers in August 2023 and scheduled for implementation from 2024 to 2027.
The minister said the plan was developed in response to persistently low levels of mergers and acquisitions (M&A) activity in Cyprus, which he linked to the structure of local businesses.
“M&A in Cyprus are at very low levels, mainly due to the type of businesses, namely family businesses in traditional sectors, where there is no culture of mergers,” he said.
To tackle this, the plan rests on three pillars. The first seeks to shift business culture by establishing a support framework for promoting consolidation.
According to Keravnos, this includes a targeted communication campaign, the organisation of events and workshops, and the promotion of successful cases both domestically and abroad.
The second focuses on reforming the legal environment.
Keravnos noted that the existing framework will be modernised and procedures streamlined to align with the European acquis. “The framework should be consistent with the European acquis and not lead to distortion of competition,” he said.
The third aims to improve access to finance, one of the most common obstacles SMEs face. The government will introduce subsidy schemes for equipment and machinery in sectors such as agriculture, manufacturing and exports, granted upon completion of a merger or acquisition. Keravnos added that incentives for investors who finance specific transactions are also under consideration.
To support this effort, the state has set up an Equity Fund with a €30 million contribution, primarily backed by the Cyprus Development Bank (CDB Bank).
The fund, managed by the European Investment Bank, will focus on start-ups and innovative Cypriot firms.
In parallel, the creation of a National Enterprise Development Organisation is underway, with €107 million in state funding earmarked for its first five years. Its mission will be to enhance financing options for SMEs and start-ups.
Keravnos underlined the significance of small businesses in Cyprus, pointing out that they make up about 99 per cent of all enterprises, with very small ones accounting for 95 per cent.
“Small and medium-sized enterprises constitute approximately 99 per cent of all enterprises in both Cyprus and the EU, with very small enterprises making up 95 per cent of enterprises in Cyprus,” he said. These firms also employ roughly 75 per cent of the country’s workforce.
He acknowledged their advantages, such as agility and close customer contact, but also highlighted major vulnerabilities.
These include limited financing, lack of specialised personnel and difficulty investing in innovation. “SMEs often lack the necessary financial and technical resources to modernise their equipment or invest in digital transformation,” he noted.
As a result, mergers and acquisitions were presented as a viable solution. “They can benefit from economies of scale, innovate more easily, have better access to financing, attract specialised personnel, and become more extroverted,” he explained.
The government’s wider tax reform will also contribute, he said, with measures aimed at enterprise support and targeted tax relief.
“Some of our proposals focus on the support and development of Cypriot enterprises, as well as on the provision of targeted tax relief that will help all economic activities horizontally,” he said.
Keravnos encouraged SMEs to engage with the incentives on offer.
“I invite our Small and Medium Enterprises to be informed and to take advantage of any incentives offered, and of course, we are always open to suggestions,” he concluded.
