• Germany's news in English
 
app_header_v3

China woos Germany's heirless 'Mittelstand'

AFP · 15 Jun 2014, 07:14

Published: 15 Jun 2014 07:14 GMT+02:00

Two years ago, engineering firm Putzmeister passed into Chinese hands after the founding family was unable to find a successor.

The takeover by Chinese giant Sany for around half a billion euros was one of the biggest investments by China in Europe at the time. But it was just the tip of the iceberg.

"Technology firms, hidden champions with problems finding an heir, that's what Chinese investors are looking out for," said Peter Englisch of EY (formerly Ernst & Young).

"Every private equity fund in the world currently has its eyes fixed on this market," the expert said.

"German firms, and particularly family-run ones, are the ideal takeover targets for Chinese investors at the moment," said Stefan Heidbreder, head of the federation of family-owned businesses.

Around 75 percent of so-called SMEs -- small and medium enterprises, or, to use the German term, "Mittelstand" -- are in family hands. Specializing in high-tech industrial applications, the sector is known for its innovation and is the driving force behind German exports.

But the tradition of succession where the father hands over the business to his son or daughter is crumbling.

Detlef Keese, of the Institute for SME Research at Mannheim University, estimates that fewer and fewer companies are remaining in family hands: the proportion has fallen from 70-75 percent in the 1990s to around 50 percent at present.

The German association of chambers of commerce and industry, DIHK, sees it as a reflection of the ageing population. But it is also a social phenomenon,
it says.

"In a lot of cases, the children are reluctant to step in to their fathers' shoes, because they have seen what toll it has taken," said Arist von Schlippe, psychologist and lecturer in the management of family-run firms at the university of Witten.

"They have a different idea of life, they want a different balance," he said.

In addition, a lot of companies are in a phase "where it's not just entrepreneurial drive and spirit that is required, but also management competence, which the young people simply don't have, or which their fathers believe that they don't have," von Schlippe said.

The first wave of post-war entrepreneurs passed on the torch in the 1970s and now it is the grandchildren's turn, the expert said.

And in the case of those companies set up in eastern Germany after the fall of communism, it is the time for the first generational changeover.

Story continues below…

In the absence of a successor, it is sometimes the non-family management which takes over by way of a management buyout, with the financial backing, say, of a private equity fund.

But the investment funds themselves sometimes act on their own. And, in other cases, the company is simply snapped up by a rival.

From this point of view, Chinese investors can often appear to be the more attractive option. They are reliant on the current workforce and frequently hold on to the existing management teams, said Heidbreder.

Another attraction is that Chinese investors are more willing to pay higher prices, said Jens-Peter Otto, who heads the Chinese-German business group at
PWC.

According to data compiled by EY, the volume of Chinese direct investment in Germany rose from €46 million to €68 million between 2012 and 2013.

German fork-lift truck manufacturer Kion, semi-conductors specialist Prema, car door latch maker Kiekert, and concrete pump maker Schwing are all now in Chinese hands.
 

For more news from Germany, join us on Facebook and Twitter.

Your comments about this article

Today's headlines
Ten injured after freight train crashes into bus in Osnabrück
The crash site in Osnabrück. Photo: DPA

A freight train crashed into a bus in Osnabrück on Wednesday morning, leaving several people badly injured, local media report.

Man wins ten-year court battle over €2.50 surcharge
Photo: DPA

An Austrian man has won a ten year court battle over an extra €2.50 he was asked to pay to get into a swimming pool in Bavaria a decade ago.

In Pictures
Düsseldorf swoons as Prince William comes for royal visit
'Well hello Mr. Prince'. Photo: DPA.

Prince William paid a visit to the Rhineland city of Düsseldorf on Wednesday to celebrate the state of North Rhine-Westphalia's 70th birthday. Here's a look at his royal stay.

Brexit
Frankfurt attempts to charm banks away from London
Frankfurt am Main. Photo: DPA

Germany's finance capital has spotted an opportunity with the Brexit-wary banking beasts of the Square Mile.

How did this bike end up on top of Berlin’s Molecule Man?
A professional climber 'rescuing' the bike hanging from the Molecule Man. Photo: DPA.

Berliners are still scratching their heads over how a bicycle ended up dangling from the capital’s iconic statue.

Travellers stuck after dozy train driver forgets Freiburg
Photo: DPA

It's one thing to miss a train - it's another when the train misses you.

Berlin airport employee admits taking €150,000 bribe
Berlin Brandenburg Airport. Photo: DPA

The German capital's long-delayed international airport has been haunted by claims of corruption and incompetency.

Teachers' union: school burqa bans only isolate girls more
Women wearing niqabs. Photo: DPA.

A German trade union for teachers has warned of the consequences of banning certain religious attire in schools after a teen this week was told she could not wear a face veil to school.

Bundesliga
Bayern ban big bags and bottles for Bundesliga opener
Photo: DPA

Bayern Munich have tightened security measures at their stadium, banning spectators from carrying big bags and bottles, ahead of Friday's home match - the first of the new German league season.

Drugstore chain DM starts selling pepper spray
Photo: DPA

One of Germany's largest drug stores has started selling pepper spray due to "increased requests" from customers.

Sponsored Article
Why you should attend an international job fair
Gallery
Germany's 17 Olympic gold medals in pictures
Sponsored Article
Why expats choose international health insurance
Culture
7 American habits that make Germans very, very uncomfortable
Rhineland
Story of a fugitive cow who outwitted police for weeks before capture
Sponsored Article
Why you should attend an international job fair
Culture
Eleven famous Germans with surnames that'll make your sides split
Sponsored Article
Life in Jordan: 'Undiscovered treasure'
Lifestyle
The best ways to get a visa as an American in Germany
14 facts you never knew about the Brandenburg Gate
Society
Ten times Germans proved they really, really love beer
Sponsored Article
Why Jordan is the ‘Different’ East
Lifestyle
What's on in Germany: events for August 2016
Sponsored Article
Five things Americans should know about voting abroad
National
Six things you need to know when moving to Germany
Travel
These 10 little-known German towns are a must see
Sponsored Article
Jordan Pass: your ticket to the experience of a lifetime
International
German scientists prove birds can sleep while flying
Sponsored Article
Jordan: where history meets adventure
Technology
London v. Berlin: Which is better for startups?
Lifestyle
13 mortifying mistakes German learners always make
Sponsored Article
6 reasons expats use TransferWise to send money
Travel
Enter if you dare: Berlin's best abandoned haunts
Sponsored Article
Why you should attend an international job fair
Lifestyle
10 rookie errors all Brits make when they arrive in Germany
Sponsored Article
Five things Americans should know about voting abroad
National
How to get German citizenship (or just stay forever)
Sponsored Article
Jordan: where history meets adventure
Technology
Brexit will turn Berlin into 'Europe’s startup capital'
Sponsored Article
6 reasons expats use TransferWise to send money
Travel
Six soothing day trips to escape the bustle of Berlin
International
'Germany needs to make UK come to its senses'
Features
Six odd things Germans do in the summer
Features
How two gay dads cut through German red tape to start a family
8,582
jobs available
Toytown Germany
Germany's English-speaking crowd