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Germany's small-medium firms offer prime M&A opportunities for China
By Norbert Knittlmayer |
April 29, 2009, Wednesday
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Print Edition
Print Edition
EACH year, thousands of Germany's family-owned small and mid-sized companies are transferred to new owners.
In the past, private equity funds acquired many of Germany's hidden champions. However, the financial crisis effectively eliminated heavily debt-financed takeovers of companies by financial investors.
This recent development opens an unexpected new window of opportunities for Chinese companies to gain access to the German and European market.
The German Mittelstand (family-owned small- and medium-sized firms) is the backbone of Germany's economy. German Mittelstand firms employ more than half of Germany's employees and generate about 42 percent of the national turn-over of private businesses.
Moreover, they are highly innovative (they rank No. 2 in the European Union) and very flexible in adapting to the ever-changing needs of their customers.
Owners of more than 70,000 German Mittelstand firms are seeking successors every year.
Surveys show that a substantial share of about 20 percent of these enterprises are sold to investing German and foreign companies.
With private equity funds now lacking the financial resources to compete aggressively for the most attractive targets, purchase prices for German mid-sized companies are on the downturn.
Traditionally these companies of the Mittelstand have relied on bank loans to finance their growth and innovation.
As the financial crisis has caused German banks to become reluctant to accept further credit-risks in their loan-portfolios, many of these companies will be seeking equity financing as a feasible alternative.
(Norbert Knittlmayer, a managing director with the German consulting firm RoelfsPartner, Cologne)
In the past, private equity funds acquired many of Germany's hidden champions. However, the financial crisis effectively eliminated heavily debt-financed takeovers of companies by financial investors.
This recent development opens an unexpected new window of opportunities for Chinese companies to gain access to the German and European market.
The German Mittelstand (family-owned small- and medium-sized firms) is the backbone of Germany's economy. German Mittelstand firms employ more than half of Germany's employees and generate about 42 percent of the national turn-over of private businesses.
Moreover, they are highly innovative (they rank No. 2 in the European Union) and very flexible in adapting to the ever-changing needs of their customers.
Owners of more than 70,000 German Mittelstand firms are seeking successors every year.
Surveys show that a substantial share of about 20 percent of these enterprises are sold to investing German and foreign companies.
With private equity funds now lacking the financial resources to compete aggressively for the most attractive targets, purchase prices for German mid-sized companies are on the downturn.
Traditionally these companies of the Mittelstand have relied on bank loans to finance their growth and innovation.
As the financial crisis has caused German banks to become reluctant to accept further credit-risks in their loan-portfolios, many of these companies will be seeking equity financing as a feasible alternative.
(Norbert Knittlmayer, a managing director with the German consulting firm RoelfsPartner, Cologne)
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