(BFM Stock Exchange) – After years of lean cows, the small and medium capitalizations of the Paris Stock Exchange are experiencing an alarm clock in recent months. Since the beginning of the year, the CAC Small index has been clearly outperforming CAC 40.

The last stock vintages were clearly not in favor of the small and medium capitalizations of the Parisian square. In a previous article, we described the reasons which explained the chronic underperformance of this universe. In particular the fact that they are very sensitive to high interest rates.

The year 2024 had not been an exception, with a political context in France which accentuated the difficulties on this asset class, underlines Dickson Moutapam, Management-AnAnalyst Actions at Promar Asset Management.

“We experienced a rebound in this compartment over the period April/June 2024 but which was killed in the egg by the announcement of the dissolution in June,” said Vincent Le Sann, deputy managing director of Portzamparc in News Bulletin 247e.

Defense in support

Last year, the CAC Mid & Small suffered a decline of more than 6%, against a drop of 2.15% for the CAC 40. The balance sheet is even heavier for the CAC Small which made almost 8% in 2024.

“For several years, SME -ETIs (small and medium -sized enterprises – intermediate -sized companies) have suffered from the difficult situation of major European economies (France and Germany) and from an unfavorable context resulting from the impact of the increase in rates on valuations”, notes Dickson Moutapam.

However, several observers believe that crossing the desert is over for small and medium capitalizations of the Paris Stock Exchange. It must be said that the dynamics observed since the beginning of the year is rather right. Since January 1, CAC Small has been appreciated by 13.6%*, outperforming the CAC 40, which won 6.4%. CAC Mid & Small is getting with honors, winning 6.6% out of 2025.

“The CAC Mid & Small index was carried by the defense values ​​which have strongly progressed like EXAIL Technologies,” TOUR TOUR Vincent Le Sann and Eric Lewin, President of El Finance on the BFM BOURSE.

The defense sector has signed impressive performance on the stock market in recent months, linked to the announcements of European leaders of increases in military budgets on the Old Continent, which will logically lead to new orders.

TP ICAP Midcap estimated in April that Exail Technologies was “ideally placed” to take advantage of the unprecedented increase in defense budgets in Europe.

Values ​​less affected by customs duties

Historically, the performance of small and medium -sized values ​​of the Paris Stock Exchange is often influenced by the macroeconomic environment and the perception of the risk of investors, recalls Philippe Hottinguer Management.

However, for the management company, the context becomes more favorable to a return of investors while the monetary cycle and growth in Europe seem, according to her, “arriving at a turning point”. The management company refers to the rate of drop in rates initiated by the European Central Bank since the summer of 2024.

Recall that the small and medium capitalizations had been violently shaken in 2023 by a rapid and brutal tightening of the credit conditions.

“The level of interest rates is an important element in the valuation of businesses, and in particular those evolving in sectors of activity which are valued by updating flows. When you have a perception of a drop in interest rates to come, the health and biotech values ​​which we know that future flows are particularly distant, benefit from this movement,” explains Vincent Le Sann.

Small and medium capitalizations are also much less internationalized than tenors on the coast. What was their Achilles heel a few years ago is now their strength. “Customs duties affect very little ‘Small Caps’. The values ​​of the CAC 40 achieve 78% of their turnover internationally, while those of CAC Small is only between 18% and 20%”, judges Eric Lewin.

An opinion which is shared by Joffrey Ouafqa, director of management at Auris Gestion. “The visibility on the ‘Small and Mid Caps’ is in the process of improving quite clearly where that on the large caps’ is a little more uncertain with the problem of customs duties,” he told the News Bulletin 247 antenna.

Especially in April when the financial markets have evolved throughout the month at the rate of advertisements on customs tariffs between the United States and its business partners. Between April 2 and 10, the tightening of relations with Washington weighed sharply on the Paris Stock Exchange, causing a 11% drop in CAC 40 while CAC Small only made 3.4% over the period.

“A more attractive valuation, an exhibition marked to the defense sector and a lesser sensitivity to the search for liquidity supported this segment”, recalls Cécile Aboulian Equity Capital Market at In Extenso Finance.

OPA and the age of the captain

The start of a more accommodating monetary cycle therefore argues in favor of a resumption of small and medium -sized European capitalizations. Just like potential business repurchase operations from this universe whose valuations are currently underway and that can interest significant-size players in search of a technological brick, particular know-how or an additional growth lever.

The experts of Philippe Hottinguer noted that in December 2024, the small capitalizations displayed a valuation with a discount at the highest 20 years compared to the large capitalizations. “The contrast is also marked against the Private Equity (Capital Investissement, Editor’s note), with a corporate value ratio relating to the gross operating profit (EBITDA) of approximately 7.4 against 9.8 for the investment capital,” they add.

This explains the large number of public offers that have hosted the rating in recent years. Last year, 42 public offers were identified on listed companies on the Paris Stock Exchange. It is 11 more than in 2023 (31) and almost as much as in 2021 (45), which then constituted a record year in the matter, according to the barometer published at the start of the year by the investment bank Alantra.

The various public offers and the premiums offered to shareholders during redemption operations in recent months have also contributed to the progression of the compartment of small and medium capitalizations, explains Eric Lewin.

The Indian company Zydus Lifesciences Limited, for example, proposed last March a price of 6.25 euros per share to buy the minorities of the Surgical Medtech Amplitude. This price exteriorized a bonus of 80.6% compared to the last course side before the announcement.

“You have a lot of bosses of companies that exceed sixties and who can no longer see their valuation braded. At one time or another, these companies will pass either under a foreign pavilion or the aegis of an investment capital fund,” says Eric Lewin. “Lots of funds are in ambush because there is a 30% discount between these small and medium capitalizations present on the stock market and one (company, editor’s note),” he abounds.

Individuals have also been a welcome point of support for this stock market boom in small and medium capitalizations since the start of the year. “Individuals are still net buyers on ‘Small’ in France while professional investors have not found a positive collection flow since the beginning of the year, despite the initiatives that have been carried out with for example the launch of the CDC growth fund in the amount of 500 million euros and the modernization of eligibility rules at the PEA PME in 2024,” explains Vincent Le Sann.

“Specialized funds on French listed SMEs have experienced a significant level of decollect in recent years. This weakening of the market also directly impacts the dynamics of quotes, the French market having identified more ratings than scholarship introductions for two years,” recalls Dickson Moutapam

Does the stock market alarm clock in recent months on small and medium capitalizations can change it and encourage new companies to join the Paris Stock Exchange? The year 2025 will in any case be, a pivotal year for small and medium capitalizations in terms of stock exchange, said Vincent Le Sann.

Variation stopped at the end of Thursday May 15