Germany's family - owned companies represent attractive M&A targets

Studies are disclosing that many family-owned, medium-sized German companies face three main problems - despite their technological advancements and enduring profitability:

(1).Problems of financing larger investments
(2).Succession problems
(3).Internal disagreements over the business strategy

While 55% of Germany's family-owned businesses say that they have problems obtaining loans from banks and savings banks, only 27% of their European competitors say that they face such difficulty. On of the reasons is still Germany's traditional financial services sector. Family-owned companies are advised to consider not just banks, but also private equity firms as investors.

About 50% per cent of Germany's family-owned companies are facing being sold off during the next five years. Thus, they represent attractive M&A targets for either strategically motivated international companies or for private equity funds.

German companies and researchers, especially family-owned mid-sized ones, are busy trail-blazing in all key industries of tomorrow. Nanotechnology  is considered to be "the" technology of the future. It comprises research and construction in extremely small structures - a nanometer is a millionth of a millimeter. Nanotechnology is working on the fundamentals for ever smaller data memories delivering ever greater capacity, for example for photovoltaic windows, for tools that can be used to produce ultra-light engines and body parts in the automobile industry, and for artificial limbs that thanks to organic nano-scale outer surfaces are more compatible with the human body. At a rough estimate, the USA and Europe have the same amount of companies engaged in nanotechnology. And of the firms in Europe around fifty percent come from Germany.

Germany ranks as an international powerhouse

There are also more than 600 companies operating successfully in the highly diverse sector  of biotechnology. Alongside other projects they address the development of new methods and processes in biomedicine technology, biomaterial research, the food industry, pest control and innovations in the pharmaceutical and chemical industries.

In total, Germany accounts for some 10.6 percent of high-tech global trade, putting it in second place behind the USA and ahead of Great Britain, Japan and France. In order to expand this posi-tion still further the Federal Government is planning to invest EUR 6 billion in nano-, bio- and information technology by the year 2010.

The German economy is  characterized first and foremost by around 3.4 million small and medium-sized enterprises as well as the self-employed and the independent professions. Some 99.7 percent of all companies are small  and medium-sized enterprises.

These are firms with annual sales of below EUR 50 million and a payroll of less than 500. Around 70 percent of all those in employment work in this type of SME; almost 82 percent of all apprenticeships are provided by SMEs. A look at the various economic sectors reveals that 48.9 percent of all SMEs operate as service providers, 31.4 percent in manufacturing, and around 19.7 percent in commerce.

Most SMEs are managed by the owners themselves, meaning that the majority shareholder and management of the company are frequently one and the same. Companies are often handed down from one generation to the next. Around 37.4 percent of all SMEs were founded after 1995.