Growing your business in Europe post-pandemic: the experts weigh in
It’s said that France is the natural entryway to Europe for many Quebec businesses. Patrick Perus, CEO of Polycor, a world leader in natural stone products, can certainly testify to this. “The similar cultures, the Frenches’ bias towards Quebecers, and the quality of the labour force available all contribute to making it a perfect market for expansion,” he explains.
A key to his success is his ability to surround himself with the right people. “Businesspeople take advantage of the opportunities that present themselves” he says. There are several organizations specializing in international development that help entrepreneurs set up shop on the other side of the Atlantic. Some of them shared their advice on May 5 at the Rencontres Internationales Desjardins organized by The Chamber of Commerce of Metropolitan Montreal`s Acclr Services in international trade. This article summarizes the highlights and presents new content as a bonus.
- What is the current business context in Europe?
- Renewed dynamism
“France is the sixth largest world economy and has 67 million residents,” notes Michèle Boisvert, Quebec’s chief delegate in Paris and the personal representative of the premier of Quebec in the French-speaking world. The prejudices that some foreign entrepreneurs have towards the country are slowly falling away, one by one…
“France invests a lot in research and development and in its infrastructures. We also note a relaxation of labour laws and an entrepreneurial culture that’s expanding,” she adds. Lastly, the 100-billion-euro relaunch plan announced by the French government seems inviting to overseas entrepreneurs. “Quebec’s delegation in Paris wants to play a major role in your development project,” she says.
- Privileged transactions
Since the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union came into effect, approximately 98 percent of tariff lines have been abolished.
The government of Quebec relies heavily on exports to create wealth. Free trade between these two markets therefore offers growth possibilities to foreign companies who want to establish themselves and thrive in Europe. “While our main commercial partner remains the United States (at 70 percent of exports), our companies instead see their future in France,” states Boisvert
- Opportunities to be seized
For Julien Tougeron, the senior director of investment and business development at Business France, the pandemic offers a panoply of opportunity. “We currently find ourselves in a situation we’ve never experienced before,” he says.
For Quebec entrepreneurs, Europe is one of the prime destinations to aim for. “French companies are experiencing hard times. They’re looking for buyers or new partners. Foreign companies can also benefit from the fact that France is the entryway to Europe and many connected markets, such as the Mediterranean and Africa,” he adds.
Moreover, the unemployment rate in France increased to 10.7 percent during the worst of the pandemic, and has been hovering around 8 percent since May of 2021. This represents an opportunity for Quebec companies to take advantage of a “windfall effect” to hire local talent who did not emerge from the crisis unscathed. “Many foreign companies have not hesitated to massively recruit French engineers, whose expertise is renowned worldwide. They’ve also been able to benefit from government incentives, such as the Crédit Impôt Recherche (CIR) [English: research tax credit] or the Crédit Impôt Innovation (CII) [English: innovation tax credit],” explains Tougeron.
- What are the challenges of breaking into the European market?
- Ignoring economic shocks
The high volatility in the world economy since the start of the pandemic is a variable that shouldn’t be overlooked. “Many industries have experienced highs and lows. Certain manufacturing or service sectors have experienced declines of 10, 20, or 30 percent before benefiting from increases of the same magnitude at the end of the first wave,” explains Antoine Krug, associate director of Groupe Siparex, a key player in private equity in France, and co-manager of The Transatlantic Fund. Quebec entrepreneurs therefore need have a long-term vision and not hold back on their plans for expansion based on the temporary volatility currently being experienced.
Stephen Wilhelm, regional vice-president for Europe, the Middle East and Africa in business development and global markets for Export Development Canada (EDC), reiterates that this period of uncertainty has restrained what was otherwise a period of remarkable growth in trade between Canada and Europe since the signing of CETA. “The pandemic brought its share of challenges, but it was a great learning experience,” he suggests.
- Dare to diversify
According to the old adage, you shouldn’t put all your eggs in one basket. “By stimulating the growth of revenue and opening up their international horizons, entrepreneurs can actually become more profitable and more resilient,” explains Wilhelm.
Diversification also applies to the supply chain. “Companies must aim for a healthy geographic distribution in their suppliers,” he continues. This way, one can take over in situations where another regular supplier becomes incapacitated.
- Understanding your target market
- What solutions are available to ensure a successful European expansion?
- Acquire a competitor or supplier
For entrepreneurs navigating the current climate, it might seem like a difficult time to be positioning yourself and making acquisitions. Yet this period is favourable to consolidation in some sectors of activity—a big company should view the acquisition of a competitor or small supplier in a positive light. Vertical integration may in some cases be a good strategy to adopt.
“We helped a Desjardins Capital portfolio company establish an acquisition strategy in France, namely by undertaking a market study and establishing a list of potential acquisition targets,” explains Claude Delâge, the senior director of investment, The Transatlantic Fund, for Desjardins Capital in Paris
- Partnering with international business experts
“Many tools are available to help Canadian companies get established overseas,” affirms Wilhelm. For example, the EDC recently advised a Quebec SME specializing in board games on how to distribute its products in Europe and enabled it to secure working capital from another financial institution. Credit insurance was also granted to protect the company from risk of non-payment when selling in foreign markets. Other solutions are also available for exporters who want to increase their production or acquire a foreign company, such as direct or indirect loans (in partnership with a financial institution).
- Obtaining financing for international development
Some financing solutions are intended specifically for entrepreneurs with plans to expand in French territory. For example, thanks to experts directly on site, the Desjardins Representative Office (Europe) supports business leaders with their operations by introducing them to various local organizations and offering financial and banking advice.
The Transatlantic Funds, a collaboration between Desjardins Capital and Siparex Group, enables the financing and support of developing French companies in the North American market from a base in Quebec, and inversely, promoting the success of Quebec companies in Europe from a base in France. Since its creation, around a dozen projects have already benefited from its services. “We’ve particularly supported the success of a company in the automotive sector with big European contractors, leading to requests for tenders,” explains Delâge.
- Going beyond financing
The search for support should not start and end with an injection of capital into your firm. Pandemic or not, choosing a partner who can introduce you to contacts, offer networking possibilities, and who holds recognized expertise on both sides of the Atlantic will definitely increase your chances of success abroad.
To view the webinar of May 5, 2021: Developing in today`s context in Europe : experts speak out (in French only)