Capital, the end of abundance. But not of growth.

The geopolitical instability characterizing recent years is much more than just a moment in time. It is a deep structural reconfiguration that has changed the rules of the game, even for companies not operating in international markets.

In fact, when competition shifts in relation to the assumptions underpinning an economy – such as infrastructure, data, logistics, energy – even the most routine business decisions acquire a dimension of risk that they did not have before.

Today, the capital market is quite different from a few years ago. Higher rates, debt structures that find themselves under constant pressure and more cautious investors have put an end to the era of abundance. The new watchword is selectivity.

Speed of growth is no longer the main criterion for evaluating venture funds and private equity, having been replaced by the quality of that which is growing. A much deeper change than it seems on the surface, going beyond simple metrics to focus on an organization’s ability to handle the complexity that comes with capital, which increases more than proportionally to the growth itself.

Growing means making more difficult decisions, with more variables, more stakeholders and more consequences. It means governance can no longer take an informal approach, reporting can no longer be sloppy, decision-making can no longer depend on a single person or on established habits in a simpler context.

Businesses that find themselves navigating this transition – both those looking to accelerate, as well as those facing a phase of financial restructuring – must answer the same fundamental question: is the organization equipped and ready to make good decisions under pressure?

The discriminating factor between business transactions that create lasting value and those that silently destroy it lies precisely here.

And investors are well aware of it. When they back a company, they bring method alongside capital: more robust accountability structures, decision-making disciplines that many family-owned businesses have never experienced before, a risk assessment approach that cannot be improvised. The value of a business transaction is constructed before signing and continues to be seen over time.

Europe is trying to play its part in the regulatory field, with the “28th regime” proposal presented by the European Commission on March 18 of this year, aimed at reducing fragmentation, lowering barriers and ultimately making the ecosystem more competitive. But a harmonized corporate form alone does not solve the problem of internal organizational complexity within companies.

The European model of doing business does not need to replicate the American one. It has its own unique characteristics, a different relationship with time, with risk, with sustainability, with the human and value dimension of an organization. These aspects are an asset more than a limit. Provided they are managed with rigor and foresight towards a clear direction.

Andrea Mennillo

Founder and Managing Director, International Development Advisory

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