The Cypriot Ministry of Finance has set its sights on amplifying the competitiveness of small and medium-sized enterprises (SMEs). By fostering economies of scale and encouraging expansion, the Ministry believes SMEs can better position themselves in the market. However, a prevailing culture of family-owned businesses and a conspicuous absence of a mergers and acquisitions mindset make this a challenging task.

Notably, statistics reinforce this narrative. The current levels of mergers and acquisitions in Cyprus are surprisingly low. To pivot this trend, the government plans to roll out incentives, moving away from tax-based benefits. Instead, the focus will be on refining the legislative landscape, broadening avenues for financial access, and initiating communication strategies to reshape the prevailing business culture.

In recent developments, the Cabinet green-lighted an Action Plan dedicated to endorsing mergers and acquisitions among SMEs. This strategic move is an integral component of Cyprus' broader Recovery and Resilience Plan, a program that has already secured the European Commission's nod.

According to Brief, the emphasis on these incentives isn't arbitrary. With Cyprus' market size relatively minuscule compared to larger EU economies, the nation naturally houses a more significant proportion of small businesses. To put this into perspective, a whopping 92.9% of Cypriot enterprises are microfirms employing up to nine individuals. Additionally, 6.1% qualify as small businesses, with their workforce numbering less than 50.

Another noteworthy statistic is the employment rate in these businesses. When juxtaposed against EU averages, Cyprus lags, with its very small and small businesses employing 38.6% and 25.3% of the workforce, respectively. In contrast, the EU averages stand at 29.7% and 20.1%.

In a broader perspective, Cyprus, with the EU's financial backing, is crafting a long-term developmental blueprint stretching until 2035. This strategy aspires to supercharge the competitiveness and output of local enterprises. By weaving in digitization and continuous training, the plan also hopes to tilt Cypriot businesses towards a more export-oriented approach. For this vision to materialize, the creation of larger, more adaptive businesses is essential, according to the Ministry. 

Makis Keraunos, the Minister of Finance, unveiled the plan, highlighting three central initiatives post its Ministry approval:

1. Enhancing Mergers & Acquisitions Culture: The Ministry aims to build a robust framework to foster and reform the existing culture around mergers, acquisitions, and businesses. This strategy entails the rollout of a targeted communication plan, hosting various seminars, and spotlighting notable success stories from both domestic and international mergers and acquisitions. Furthermore, a revamped national entrepreneurial policy is in the works, emphasizing the cultivation of a mergers-and-acquisitions-centric culture. The Ministry of Energy, in collaboration with the Industry and Technology Service of YEEV, will spearhead these efforts. The target timeframe for this initiative is 2024-2026.

2. Legal Framework Modernization: Under this initiative, the Ministry is dedicated to revamping the existing legal structure governing companies. The goal is to simplify and enhance the procedures related to mergers and acquisitions. Drawing inspiration from successful European models similar to Cyprus' legal framework, the ministry will investigate ways to streamline these processes, ultimately reducing administrative burdens. The Ministry of Finance will lead this initiative, with a slated execution window of 2024-2026.

3. Targeted Financial Access for Key Economic Sectors: The Ministry is gearing up to launch financing schemes, emphasizing sectors that have witnessed recent mergers or acquisitions. Specific areas of focus include agriculture, processing, and exports. These subsidy plans will cater to machinery and equipment investments, aligning with the Ministry's broader goal of fostering economic growth. The expected rollout for these plans ranges between 2025-2027.