• 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
Germany says 'won't let anyone take Europe from us'
Steinmeier called the European Union “a successful project of peace and stability”. Photo: DPA

German Foreign Minister Frank-Walter Steinmeier said on Saturday that the EU would weather the shock of the British vote to leave the union as he convened crisis talks.

Brexit vote
Brexit will turn Berlin into 'Europe’s startup capital'
A sign in Berlin's tech giant and startup-building company Rocket Internet. Photo: DPA.

London is currently thought of as the main hub for startups in Europe, but that will all turn around when the UK leaves the EU, tech industry experts say.

Brexit vote - Analysis
'Germany needs to make UK come to its senses'
British Leave campaigners celebrate Brexit result. Photo: DPA

Britain leaving the EU means trouble ahead for Germany - and its hardest task will be convincing the Brits to drop a self-defeating ideology, a leading foreign policy expert told The Local.

How to get German citizenship (or just stay forever)
Photo: DPA.

Considering a change of passport after the UK's vote to ditch the EU? Here’s how to do it.

Germany makes fracking verboten
A sign in North Rhine-Westphalia. Photo: DPA.

German lawmakers approved a law that essentially bans fracking, ending years of dispute over the controversial technology to release oil and gas locked deep underground.

Brexit vote
German far right 'cries for joy' after UK votes to leave EU
Left to right: AfD's Beatrix von Storch and Frauke Petry. Photo: DPA

The far-right AfD party called for a "new Europe" and the resignation of the EU's top two politicians in the wake of the Brexit vote.

Brexit vote
Merkel: Brexit has cut into European unity
Angela Merkel at a press conference after the Brexit vote on Friday. Photo: DPA.

Chancellor Angela Merkel said on Friday that the UK's decision to leave the EU has created a "cut in Europe" and the project of European unity.

Couple copulating on bridge shut down Autobahn
Kaiserlei Bridge in Frankfurt. Photo: Dontworry / Wikimedia Commons.

It was a highly unusual choice of location for a romantic rendezvous, police in Frankfurt point out.

Brexit vote
Germany: Brexit vote is a 'sad day for Europe'
A British flag along with other flags of European Union member countries flies in front of the European Council building in Strasbourg, France. Photo: EPA.

Top German leaders declared that it was a "sad day for Europe" after British voters opted to leave the European Union.

Viernheim hostage-taker wasn't carrying lethal weapon
A police officer stands guard in front of the cinema in Viernheim. Photo: DPA

The 19-year-old German man who took over a dozen people hostage in a cinema in western Germany on Thursday was carrying replica weapons, prosecutors have confirmed.

Sponsored Article
Why you should attend an international job fair
Features
How two gay dads cut through German red tape to start a family
Sponsored Article
Education abroad: How to find an international school
Features
Six odd things Germans do in the summer
Travel
These 10 little-known German towns are a must see
Sponsored Article
US expats: Taxes are due June 15th
National
Five things to know about guns in Germany
Sponsored Article
Avoid hidden fees when sending money overseas
Gallery
7 photos which show the aftermath of Bavaria's Autobahn bridge collapse
Culture
10 things you need to know before attending a German wedding
National
Eight weird habits you'll pick up living in Germany
Sponsored Article
Health insurance for expats in Germany: a quick guide
Lifestyle
Six reasons 'super-cool' Berlin isn't all it's cracked up to be
Society
Only one country likes getting naked on the beach more than Germany
Lifestyle
23 ridiculously fascinating things you never knew about Berlin
Culture
8 German words that perfectly sum up your 20s
Sport
How to sound like an expert on German football this summer
Lifestyle
Can't make it past the door at Berlin's most famous club? Help is at hand
Business & Money
Why Frankfurt could steal London's crown as Europe's finance capital
Features
6 surprising things I learned about Germany while editing The Local
Culture
Five sure-fire ways to impress Germans with your manners
Features
6 reasons Germany's summer is unbeatable for thrill-seekers
National
The future belongs to these 10 German regions
Society
How pictures of footballers on chocolates made Pegida really mad
Health
New father's tragic herpes warning touches 1000s online
National
Bayer's Monsanto takeover would be 'diabolical': environmentalists
7,931
jobs available
Toytown Germany
Germany's English-speaking crowd