75% of “Mittelstands” – German SMEs – are family-run businesses. But without an successor to carry them on, more and more are being sold to foreign investors.
With fewer and fewer children of business owners willing to take up the reins once their parents retire, only 50% of Mittelstands now stay within the family, Mannheim University’s Institute for SME Research has found. Often, this leaves business owners with few options beyond selling a company that they may have spent a lifetime building to an investment fund or competitor. Compared with these outcomes, sale to an overseas buyer who will retain the existing workforce and management team can seem an attractive alternative.
According to a report in The Local, China is leading this wave of buyouts, partly due to their willingness to pay higher prices. Data collected by EY found that Chinese direct investment in Germany soared from EUR 46m in 2012 to EUR 68m in 2013.
“Technology firms, hidden champions with problems finding an heir, that’s what Chinese investors are looking out for,” said EY’s Peter Englisch. “Every private equity fund in the world currently has its eyes fixed on this market.”