Small and medium-sized enterprises (SMEs) continue to play a crucial role in the French economy, accounting for 99.9% of all businesses and generating 23% of total added value. However, as 2024 draws to a close, these economic players are facing a complex environment marked by both structural and cyclical challenges.
SME situation at the end of 2024
According to the latest data from the Banque de France and Bpifrance, investment by SMEs is running out of steam: only 51% of managers said they had invested or planned to do so in 2024, compared with 56% the previous year. This indicator bears witness to growing caution, directly linked to current economic uncertainty.
Business failures surged in the second half of 2024. 16,405 insolvencies were recorded in the second quarter, up 21% on 2019, impacting nearly 264,000 jobs. The hardest-hit sectors include construction (+27% insolvencies) and hotels & catering, while fields such as healthcare and digital are showing more resilience.
These tensions can be explained by :
- Rising interest rates, increasing borrowing costs for businesses.
- Moderate but persistent inflation.
- The energy crisis, which is weighing particularly heavily on the industrial and construction sectors.
Impact on company valuation
Against this backdrop, company valuations in France have been directly affected:
- More cautious valuation multiples: With a heightened perception of risk, potential buyers are applying deeper discounts, particularly in sectors heavily impacted by the economic climate (construction, hotels & catering): year-on-year decline of around 4.4% on average across all sectors - XVAL data.
- Increasing importance of cash flow: Companies with strong balance sheets and good cash flow management are more likely to be valued, as they inspire greater confidence in investors: average valuation 11.1% higher - XVAL data
- A premium for resilient sectors: Companies positioned in buoyant sectors such as healthcare, technology services or the green economy benefit from higher multiples thanks to robust growth prospects.
Outlook for first-half 2025
Macroeconomic projections for 2025 are slightly more optimistic. The Banque de France forecasts GDP growth of 1.2% in 2025, compared with 1.1% in 2024. Inflation, meanwhile, is expected to fall back to 1.5%, which should ease some of the pressure on SME margins.
However, a number of challenges remain:
- Access to financing: Credit conditions remain more restrictive, which could limit companies' investment capacity.
- Investment recovery: A gradual return to confidence is expected, but this will depend heavily on developments in the geopolitical context and monetary policies.
Opportunities for SMEs and added value
Despite this mixed picture, certain opportunities are emerging:
- Digital transformation: Companies that invest in digital technology and automation boost their competitiveness and attractiveness. According to the 2024 barometer of digital transformation for SMEs, 68% of managers identify digital technology as a key lever for their development.
- External growth: Acquirers are looking to take advantage of lower valuations in struggling sectors to make strategic acquisitions.
- ESG and innovation: Companies that integrate environmental, social and governance criteria into their strategy see their value increase as investors seek out sustainable assets.
Conclusion: A two-speed valorization
As 2024 draws to a close, the SME market is showing contrasting trends:
- On the one hand, companies in difficulty are seeing their valuations fall as a result of tense economic conditions.
- On the other hand, resilient and innovative players stand out for their ability to attract investors and buyers at attractive multiples.
For managers, the key lies in anticipation and adaptation: investing in growth sectors, optimizing their balance sheet and preparing for a possible sale. In this context, having your company regularly valued by experts such as XVAL becomes essential for adjusting your strategies and maximizing its value.
You would like to obtain a precise and detailed valuation of your company from a sector expert:
