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The Economic Power of the Deutsche Mittelstand

The document outlines the economic significance of German small and medium-sized enterprises (SMEs), particularly the 'Mittelstand', which constitutes 99.7% of all companies in Germany and employs nearly 80% of the workforce. It discusses Bavaria's strategic advantages for investment and trade, including a strong infrastructure and significant GDP contributions. Additionally, it highlights the impact of external economic factors, including the eurozone crisis, on mergers and acquisitions within the region.

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The Economic Power of the German ‘Mittelstand ‘ Invest in Bavaria Prof. Dr.-Ing. Kai Lucks
Global Positioning Prof. Dr.-Ing. Kai Lucks
Outlook 2013: Top 3 Barriers Against Investments Source: FT-Hogan Lovells survey of global firms November 2012 Prof. Dr.-Ing. Kai Lucks
Outlook on Global Firms 2013: M&A Has Lost its Top Priority Source: FT-Hogan Lovells survey of global firms November 2012 Prof. Dr.-Ing. Kai Lucks
The 21 Leading Export Nations in 2011 Exports in billion USD 2000 1899 1800 1600 – Bavaria is in place 26 among the large export nations 1481 – The export quota in the Munich region is 60 % 1474 1400 1200 1000 823 800 600 660 597 555 523 522 476 473 456 452 400 410 365 350 308 297 297 285 226 200 0 Source: Chamber of Industry and Commerce Prof. Dr.-Ing. Kai Lucks Seite 5
European Perspectives Prof. Dr.-Ing. Kai Lucks
Prof. Dr.-Ing. Kai Lucks
Europe: 27 Member States Prof. Dr.-Ing. Kai Lucks
The 15 Members of the Eurozone Prof. Dr.-Ing. Kai Lucks
The European Diversity is a Result of Different Ways to Deregulation of Markets 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 UK Norway Sweden Germany California Chile Argentina Spain Victoria Italy New Zealand Alberta Prof. Dr.-Ing. Kai Lucks Portugal France
How is Economic and Political Uncertainty in the Eurozone Impacting on Your Plans for Growth? Source: FT-Hogan Lovells survey of global firms November 2012 Prof. Dr.-Ing. Kai Lucks
Europe is the Most Important Trading Partner for the US Inter continental trading volume 2012 up to September: 485 Bio US$ 390 Bio US$ CHN USA 79 Bio US$ EU 200 Bio US$ US Exports 2012 up to September: “There is now, for the first time in years, a serious drive towards an E.U.U.S. free-trade agreement,” (Karel De Gucht, the European trade commissioner, said in Dublin in November) The chamber estimates that an agreement that eliminated tariffs and other barriers between the United States and Europe could add 1.5 percentage points to growth on both sides of the Atlantic. Source: New York Times By Jack Ewing, November 25, 2012 Prof. Dr.-Ing. Kai Lucks
2013 M&A increasingly driven by depressed valuations and a glut of high-quality assets Deal Drivers: 2013 Expectations vs. Last Year‘s Results Source: Freeman Consulting Services & Thomson Reuters, November 2012 Prof. Dr.-Ing. Kai Lucks
European M&A in 2013 to be dampened by Eurozone crisis, but Americas and APAC largely escape fallout Impact of Eurozone crisis and resulting banking turmoil Source: Freeman Consulting Services & Thomson Reuters, November 2012 Prof. Dr.-Ing. Kai Lucks
Renewed interest in foreign assets means active crossborder M&A Market should continue Most attractive regions for acquisitions Source: Freeman Consulting Services & Thomson Reuters, November 2012 Prof. Dr.-Ing. Kai Lucks
From a User Economics View Europe is Diverse in (a) Structure, (b) Profitabilities, (c) Buyer Segments & (d) Labour Costs Western Sphere Core North Track r nte Ce Eastern Sphere North Track k loc B South Track MMI Analysis South Track Western Sphere Core Prof. Dr.-Ing. Kai Lucks Eastern Sphere
Germany Prof. Dr.-Ing. Kai Lucks
The Federal Republic of Germany Prof. Dr.-Ing. Kai Lucks
The German Neighborhood Prof. Dr.-Ing. Kai Lucks
Statistical Figures Space 01.01.2011 in km2 in % 357. 100 Bavaria 71. Upper Bavaria 18. Federation Inhabitants 30.06.2011 in Mio. GDP 2010 Jobless 2011 Consumption Index 2012 in % in Mrd. € in % 82. 100 2.500 100 7,1 % 100,0 20 13. 15 442 18 3,8 % 108,7 5 4, 5 185* 7* 3,6 % 123,0 *Anteilig berechnet auf Basis von 2009. Quellen: Statistisches Landesamt Bayern, Arbeitsagentur, GfK Geomarketing sowie eigene Berechnungen. Stand: 24.01.2012 Prof. Dr.-Ing. Kai Lucks Page 20
Germany‘s Main Import Sectors are Chemicals, Crude Oil & Gas, Machinery and Electrical Engineering Prof. Dr.-Ing. Kai Lucks
Germany‘s Main Export Sectors are Machinery, Road Motor Vehicles, Chemicals and Electrical Engineering Prof. Dr.-Ing. Kai Lucks
The United States are Germany‘s No.2 Investment Region Prof. Dr.-Ing. Kai Lucks
The USA have invested 24% of all FDI Projects in Germany since 2007. The majority of FDI projects consisted of ICT & Software. Prof. Dr.-Ing. Kai Lucks
In 2011, Germany Imported Primarily Chemicals, Machinery and Pharmaceuticals from the US. Prof. Dr.-Ing. Kai Lucks
In 2011, US Investments Amounted to 178 Projects. Bavaria and Hessen are the Top Destinations for US Investors. Prof. Dr.-Ing. Kai Lucks
The ICT & SW Sector is Highly Attractive to US Investors. Sales, Marketing & and Support Account for the Majority of all FDI Projects. Prof. Dr.-Ing. Kai Lucks
Source: German American Chamber of Commerce 2012 Prof. Dr.-Ing. Kai Lucks
Structure of the German „Mittelstand“ Prof. Dr.-Ing. Kai Lucks
SME‘s in Germany: Share of Overall Economy SME-definition according to IfM: up to 499 Employees and 50 Mio € Sales Prof. Dr.-Ing. Kai Lucks
Potentials of German Companies Company Size Type Number of Employees Overall Sales Volume in Mio € Number of Companies Smallest Companies 1-9 <= 1 1 Mio. Small Companies 10 - 49 5 – 25 Mio 100.000 Medium Sized Companies 50 - 249 26 - 49 20.000 Large Scale Companies 250 - 500 50 - 249 7.000 > 500 >= 250 500 Big Companies Source: Statistisches Bundesamt, Umsatzsteuer Fachserie 14 Reihe 8.- ifm Bonn 2002.- Estimations of MMI Prof. Dr.-Ing. Kai Lucks
German small and medium-sized enterprises enjoy global recognition, strengthening the brand of the ‘German Mittelstand’ 1.Germany’s small and medium-sized companies (Mittelstand) experience a strong reputation globally. 2.Small and medium-sized companies are the social and economic backbone of the German economy. 3.By European comparison, Germany’s SMEs are highly efficient at moderate labor costs. 4.German enterprises are the foundation of manufacturing among medium-sized companies in the EU. 5.Germany’s medium-sized companies hold the top position in many of the EU’s manufacturing industries. 6.Small and medium-sized companies represent 99.7% of all companies in Germany and employ almost 80% of all employees. 7.Medium-sized companies in Germany have a much larger influence on the national economy than small companies. 8.More than 340,000 German SMEs benefit from exports to global markets. 9.German SMEs are highly active in research and development, creating competitive “Made in Germany” innovation. 10.The German government strongly supports innovation created by small and medium-sized companies – welcoming foreign investors as well. Prof. Dr.-Ing. Kai Lucks
Germany’s small and medium-sized companies (Mittelstand) experience a strong reputation globally. Prof. Dr.-Ing. Kai Lucks
Small and medium-sized companies are the social and economic backbone of the German economy. With about 3.6 million registered small and medium sized companies (SME), the German Mittelstand comprises 99.7% of all enterprises. These companies each employ a staff of less than 500 employees Almost 21 million people in Germany work for SMEs. With a share of 79.6% of all employees, the German Mittelstand is a major employment driver. German SMEs contribute strongly to the national economy’s success. Their share of net value added amounts of 51.3%*. Note: data refer to 2009, *ifm estimation; Source: IfM Bonn 2012 Prof. Dr.-Ing. Kai Lucks
By European comparison, Germany’s SMEs are highly efficient at moderate labor costs. Prof. Dr.-Ing. Kai Lucks
German enterprises are the foundation of manufacturing among medium-sized companies in the EU Gross value added of medium sized enterprizes in EU Manunfacturing 2009 in % Note: *companies with 50 to 250 employees according to EU-definition, **2008 data; Source: Eurostat 2012 Prof. Dr.-Ing. Kai Lucks
Germany’s medium-sized companies hold the top position in many of the EU’s manufacturing industries. Gross value added of Medium-Sized Enterprises* in selected EU manufacturing industries (2009, in %) * Note: *companies with 50 to 250 employees according to EU-definition, 2008 data; Source: Eurostat 2012 Prof. Dr.-Ing. Kai Lucks
Small and medium-sized companies represent 99.7% of all companies in Germany and employ almost 80% of all employees. Economic Influence of German SMEs by Share of … (2009) Source: Federal Statistical Office 2011, ifm Bonn 2011 Prof. Dr.-Ing. Kai Lucks
Medium-sized companies in Germany have a much larger influence on the national economy than small companies. Medium-Sized* Companies in Germany (2009) Note: *Medium-sized companies employ between 10 and 499 employees and generate an annual turnover between EUR 1-50 m, according to ifm-definition. Small companies employ up to 9 employees and generate a turnover of up to EUR 1 m. Source: Federal Statistical Office 2011 . Prof. Dr.-Ing. Kai Lucks
More than 340,000 German SMEs benefit from exports to global markets. Exporting SMEs in Germany by Sector (2009) German SMEs generated an export turnover of EUR 177 bn in 2009. More than 78% of that turnover was realized in manufacturing and wholesale & retail trade. More than 41% of all medium-sized enterprises in Germany benefit from global markets through exports. Almost 12% of their turnover comes from business abroad. Export activities of German companies are strongly promoted by governmental organizations, e.g. Germany Trade & Invest. Source: ifm Bonn 2011, Federal Statistical Office 2011 Prof. Dr.-Ing. Kai Lucks
German SMEs are highly active in research and development, creating competitive “Made in Germany” innovation. R&D Expenditures and Number of Personnel in SMEs (< 500 employees) Note: *CAGR = compound annual growth rate, Source: Stifterverband 2012, IW Dienst 2011. Prof. Dr.-Ing. Kai Lucks
The German government strongly supports innovation created by SME companies – welcoming foreign investors as well. Source: Federal Ministry of Economics and Technology Prof. Dr.-Ing. Kai Lucks
The Internal Conditions for M&A Have Improved But External Barriers Have Increased Prof. Dr.-Ing. Kai Lucks
The ‚German Mittelstand‘ is different American SME Company German ‚Mittelstand‘ Huge homogenious home market Smaller national home market Shorter term performance orientation Long term performance orientation Open to M&A M&A largely seen as risk Long term R&D seen as risky Dedicated to long term orientated R&D MBO, MBI more frequently Family succession preferred Present in a few different national markets Present in 10 out of 27 different national markets One (few) country governance systrem Multi-country governance system Low cost source in Mexico at 1000 miles away Low cost country at 100 km distance Prof. Dr.-Ing. Kai Lucks
M&A in the German „Mittelstand“ Prof. Dr.-Ing. Kai Lucks
German M&A Midmarket Deal Index MidMax Market peaked in 2007 – afterwards coming down by 70 % (deals) / down by 47% (index) Prof. Dr.-Ing. Kai Lucks
The German Mid M&A market shows little density and is less mature than other leading markets high NDL USA GBR Maturity in M&A GER Density in M&A Source: MMI Analysis Prof. Dr.-Ing. Kai Lucks high
The German Mittelstand is Active in China – and Vice Versa 5.000 German Companies having manufacturing activities in China 6.000 Chinese Companies operating in Germany Prof. Dr.-Ing. Kai Lucks
Auch kleinere Projekte können komplexe Herausforderungen darstellen: Beispiel: Hybridmodell bestehend aus Projektstufen und durchgängigen Prozessen Strategy Check Path Screen Exploration Due Diligence Busin. Case Contracts 1 Information Process 3 Measures Planning Process 4 Valuation Process 5 Communication & Change Process 6 100 Days. Legal Process 2 Integr Prep. Controlling Process Negotiation Permission Readiness at Closing Prof. Dr.-Ing. Kai Lucks One Year
Bavaria Prof. Dr.-Ing. Kai Lucks
10 Reasons for Bavaria 1. An unmatched location in Central Europe 2. Gateway to Central and Eastern Europe 3. Most modern energy, transportation and telecommunications infrastructure 4. Highly-qualified, motivated employees 5. World-renowned universities and research institutions 6. High-tech clusters with a bright future 7. Strong business partners 8. Pro-active economic policies 9. Targeted support services for potential investors 10. Work where others vacation Prof. Dr.-Ing. Kai Lucks
Stable German Economy • Strong expansion after Financial crisis in 2011 continued. • Dynamic economic growth of 3,7% in 2010 and 3% in 2011. • State institution‘s consumption stable, at year-end 2011 slightly reduced. • National demand becoming an important growth motor in 2011. • Employment situation with continuous positive development. Prof. Dr.-Ing. Kai Lucks
Important Foreign Investments in Germany • Worldwide important investment location. No 5 worldwide (2010) • Greenfield new investments on high level and stable • Between 2000 and 2009 steady annual growth of foreign direct investments: +5% p.a. • Most important industries for foreign investments: Information & communication technologies, software & services, automotive, machine building, chemistry. Prof. Dr.-Ing. Kai Lucks
Growing Foreign Trade from Germany • Demand from established exportation goods customers (EU, USA) slightly shrinking. Asian requests for German quality steadily growing • Especially expectations for consumer goods continue to be positive for foreign trade • Exports growing double digit in 2010, in 2011 +8,2%. Prognosis for 2012 growht stable but smaller • Qualitatively high value and specialized products of German companies ensure strong position in global export markets Prof. Dr.-Ing. Kai Lucks
Prof. Dr.-Ing. Kai Lucks
Bavarian Cluster Initiative Prof. Dr.-Ing. Kai Lucks
Prof. Dr.-Ing. Kai Lucks
Prof. Dr.-Ing. Kai Lucks
Prof. Dr.-Ing. Kai Lucks
Bavaria in Facts & Figures • Bavarian GDP of € 444.8 Bio is larger than those of 20 of the EU 27 member states • GDP per capita amounts to € 35.530 – well above Germany • Main Hubs are Munich and Nuremberg – two of the world top-ranked metropolitan areas • Bavaria‘s business community shows a great diversity of size and sector: Allianz, Siemens, BMW, Audi, EADS, Adidas, Puma and MAN & large number of Small & medium enterprises • Service sector constitutes an especially strong part of Bavaria‘s business community: largest German insurance community, second largest banking one • Tourism: one of the world‘s favorite places to visit • State‘s infrastructure – high capacity, ultra-reliable grids for transportation, highways, telecommunication and energy • Education, research and development: more than 3% of Bavaria‘s GDP goes to R&D Prof. Dr.-Ing. Kai Lucks
Bavarian Exports and Imports with China Bavarian imports from China Bavarian exports to China in million Euro in million Euro 14000 11800 10558 10000 10000 8000 6746 8000 7206 11156 8842 6916 6000 5641 6000 4000 12816 12000 11643 12000 13692 14000 14214 4960 3824 4000 2000 2000 0 0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Source: Chamber of Industry and Commerce of Bavaria Prof. Dr.-Ing. Kai Lucks Seite 61
Bavarian Exports and Imports with Hongkong Bavarian imports from Hongkong Bavarian exports to Hongkong in million Euro 1000 865 900 800 929 500 407 400 749 559 617 359 348 696 700 600 in million Euro 307 594 300 273 500 268 217 400 200 300 200 100 100 0 0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Source: Chamber of Industry and Commerce Prof. Dr.-Ing. Kai Lucks Seite 62
Technology Cluster Initiative Bavaria Mobility Material Development Mankind and Environment Infotec & Electronics Services & Media Automotive New Materials Biotechnology Infocom Technology Financial Services Rail Chemistry Medical Technology Sensors Media Logistics Nanotechnology Energy Power Electronics Environmental Mechatronic Automation Aerospace Forest & Wood Nutrition Source: Bavarian Financial Institute Prof. Dr.-Ing. Kai Lucks
Prof. Dr.-Ing. Kai Lucks
Inroads to the German ‚Mittelstand‘ Prof. Dr.-Ing. Kai Lucks
There are Different Promising Market Entry Paths to Germany Green field Brown field 2nd tier component supplier 1st tier /system supplier OEM & Brands M&A Prof. Dr.-Ing. Kai Lucks
Coverage of the Value Chain: Building up Strategic Positions Driver for national market share from business start… Global License Sourcing National Suppliers R&D Assembly Manufact Distributors Third party Sales Own Components Own Patents Manufacturing Salesforce Service Own Fleet …to building up of national lead positions Prof. Dr.-Ing. Kai Lucks 67
Market Positions versus Earning Positions ++ Average earnings from business M&A-entry resulting in profitable No3-position 0 0 Nr. 1 Nr. 2 Nr. 3 Organic market entry stimulated by price wars and ending in undercritical market shares Nr. 4 and worse Market position Attractive results only through market positions from No1 to No 3 Siemens Database – MMI Analysis Prof. Dr.-Ing. Kai Lucks 68
The German ‚Mittelständler‘ is Tied Into a Dense Network Social Network Industry Community State‘s Organizations BDI Germany Invest Unions Cities & Areas Competitive Cluster Car Makers Manufact Automat Industrie Verbände SME Suppliers Invest in Bavaria 10.000 Consultants 1000 M&A Boutiques Services Network Fraunhofer Hochschulen Clients Max Planck Elite Universities Value Chain Network Universities‘ Network R&D Network Foreign enterprises can only be successful if they tie into this network Prof. Dr.-Ing. Kai Lucks
Why to Acquire Companies from the German ‚Mittelstand‘? 1. Huge amount of target companies (1 Mio companies with sales up to 5 Mio € .- 100.000 companies with sales of 5-25 Mio € .- 20.000 companies with sales of 26-49 Mio € .- 7.000 companies with sales of 50-250 Mio €) 2. SMEs represent 99.7% of all companies in Germany and employ almost 80% of all employees 3. More than 340,000 German SMEs benefit from exports to global markets. Many global market leaders (niches and specialties) 4. German SMEs are long term business orientated and highly active in R&D, creating competitive “Made in Germany” innovation 5. Typically present in a multitude of countries (27 EU member states), having structures and systems to cover different markets 6. Access to East European low cost suppliers and subsidiaries (wage differences 10:1) at distances of a few 100 km 7. Investing in German SMEs could enable them to enter into the US and Chinese markets: attractive complementarity of interests Prof. Dr.-Ing. Kai Lucks
Invest in Bavaria German Federal M&A Association Bismarckstraße 24 a.mueller@bm-a.de Friedberg 61169 Deutschland e Pippinstraße 10 D 82131 Gauting Germany Prof. Dr.-Ing. Kai Lucks President‘s Office: Mrs. Simone Schnell Phone +49 6031 7386-18 Fax +49 6031 7386info@bm-a.de Pippinstraße 10 D 82131 Gauting Phone: +49 89 89328592 Fax: +49 89 89306240 info@merger-mi.de

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The Economic Power of the Deutsche Mittelstand

  • 1.
    The Economic Powerof the German ‘Mittelstand ‘ Invest in Bavaria Prof. Dr.-Ing. Kai Lucks
  • 2.
  • 3.
    Outlook 2013: Top3 Barriers Against Investments Source: FT-Hogan Lovells survey of global firms November 2012 Prof. Dr.-Ing. Kai Lucks
  • 4.
    Outlook on GlobalFirms 2013: M&A Has Lost its Top Priority Source: FT-Hogan Lovells survey of global firms November 2012 Prof. Dr.-Ing. Kai Lucks
  • 5.
    The 21 LeadingExport Nations in 2011 Exports in billion USD 2000 1899 1800 1600 – Bavaria is in place 26 among the large export nations 1481 – The export quota in the Munich region is 60 % 1474 1400 1200 1000 823 800 600 660 597 555 523 522 476 473 456 452 400 410 365 350 308 297 297 285 226 200 0 Source: Chamber of Industry and Commerce Prof. Dr.-Ing. Kai Lucks Seite 5
  • 6.
  • 7.
  • 8.
    Europe: 27 MemberStates Prof. Dr.-Ing. Kai Lucks
  • 9.
    The 15 Membersof the Eurozone Prof. Dr.-Ing. Kai Lucks
  • 10.
    The European Diversityis a Result of Different Ways to Deregulation of Markets 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 UK Norway Sweden Germany California Chile Argentina Spain Victoria Italy New Zealand Alberta Prof. Dr.-Ing. Kai Lucks Portugal France
  • 11.
    How is Economicand Political Uncertainty in the Eurozone Impacting on Your Plans for Growth? Source: FT-Hogan Lovells survey of global firms November 2012 Prof. Dr.-Ing. Kai Lucks
  • 12.
    Europe is theMost Important Trading Partner for the US Inter continental trading volume 2012 up to September: 485 Bio US$ 390 Bio US$ CHN USA 79 Bio US$ EU 200 Bio US$ US Exports 2012 up to September: “There is now, for the first time in years, a serious drive towards an E.U.U.S. free-trade agreement,” (Karel De Gucht, the European trade commissioner, said in Dublin in November) The chamber estimates that an agreement that eliminated tariffs and other barriers between the United States and Europe could add 1.5 percentage points to growth on both sides of the Atlantic. Source: New York Times By Jack Ewing, November 25, 2012 Prof. Dr.-Ing. Kai Lucks
  • 13.
    2013 M&A increasinglydriven by depressed valuations and a glut of high-quality assets Deal Drivers: 2013 Expectations vs. Last Year‘s Results Source: Freeman Consulting Services & Thomson Reuters, November 2012 Prof. Dr.-Ing. Kai Lucks
  • 14.
    European M&A in2013 to be dampened by Eurozone crisis, but Americas and APAC largely escape fallout Impact of Eurozone crisis and resulting banking turmoil Source: Freeman Consulting Services & Thomson Reuters, November 2012 Prof. Dr.-Ing. Kai Lucks
  • 15.
    Renewed interest inforeign assets means active crossborder M&A Market should continue Most attractive regions for acquisitions Source: Freeman Consulting Services & Thomson Reuters, November 2012 Prof. Dr.-Ing. Kai Lucks
  • 16.
    From a UserEconomics View Europe is Diverse in (a) Structure, (b) Profitabilities, (c) Buyer Segments & (d) Labour Costs Western Sphere Core North Track r nte Ce Eastern Sphere North Track k loc B South Track MMI Analysis South Track Western Sphere Core Prof. Dr.-Ing. Kai Lucks Eastern Sphere
  • 17.
  • 18.
    The Federal Republicof Germany Prof. Dr.-Ing. Kai Lucks
  • 19.
  • 20.
    Statistical Figures Space 01.01.2011 in km2 in% 357. 100 Bavaria 71. Upper Bavaria 18. Federation Inhabitants 30.06.2011 in Mio. GDP 2010 Jobless 2011 Consumption Index 2012 in % in Mrd. € in % 82. 100 2.500 100 7,1 % 100,0 20 13. 15 442 18 3,8 % 108,7 5 4, 5 185* 7* 3,6 % 123,0 *Anteilig berechnet auf Basis von 2009. Quellen: Statistisches Landesamt Bayern, Arbeitsagentur, GfK Geomarketing sowie eigene Berechnungen. Stand: 24.01.2012 Prof. Dr.-Ing. Kai Lucks Page 20
  • 21.
    Germany‘s Main ImportSectors are Chemicals, Crude Oil & Gas, Machinery and Electrical Engineering Prof. Dr.-Ing. Kai Lucks
  • 22.
    Germany‘s Main ExportSectors are Machinery, Road Motor Vehicles, Chemicals and Electrical Engineering Prof. Dr.-Ing. Kai Lucks
  • 23.
    The United Statesare Germany‘s No.2 Investment Region Prof. Dr.-Ing. Kai Lucks
  • 24.
    The USA haveinvested 24% of all FDI Projects in Germany since 2007. The majority of FDI projects consisted of ICT & Software. Prof. Dr.-Ing. Kai Lucks
  • 25.
    In 2011, GermanyImported Primarily Chemicals, Machinery and Pharmaceuticals from the US. Prof. Dr.-Ing. Kai Lucks
  • 26.
    In 2011, USInvestments Amounted to 178 Projects. Bavaria and Hessen are the Top Destinations for US Investors. Prof. Dr.-Ing. Kai Lucks
  • 27.
    The ICT &SW Sector is Highly Attractive to US Investors. Sales, Marketing & and Support Account for the Majority of all FDI Projects. Prof. Dr.-Ing. Kai Lucks
  • 28.
    Source: German AmericanChamber of Commerce 2012 Prof. Dr.-Ing. Kai Lucks
  • 29.
  • 30.
    SME‘s in Germany:Share of Overall Economy SME-definition according to IfM: up to 499 Employees and 50 Mio € Sales Prof. Dr.-Ing. Kai Lucks
  • 31.
    Potentials of GermanCompanies Company Size Type Number of Employees Overall Sales Volume in Mio € Number of Companies Smallest Companies 1-9 <= 1 1 Mio. Small Companies 10 - 49 5 – 25 Mio 100.000 Medium Sized Companies 50 - 249 26 - 49 20.000 Large Scale Companies 250 - 500 50 - 249 7.000 > 500 >= 250 500 Big Companies Source: Statistisches Bundesamt, Umsatzsteuer Fachserie 14 Reihe 8.- ifm Bonn 2002.- Estimations of MMI Prof. Dr.-Ing. Kai Lucks
  • 32.
    German small andmedium-sized enterprises enjoy global recognition, strengthening the brand of the ‘German Mittelstand’ 1.Germany’s small and medium-sized companies (Mittelstand) experience a strong reputation globally. 2.Small and medium-sized companies are the social and economic backbone of the German economy. 3.By European comparison, Germany’s SMEs are highly efficient at moderate labor costs. 4.German enterprises are the foundation of manufacturing among medium-sized companies in the EU. 5.Germany’s medium-sized companies hold the top position in many of the EU’s manufacturing industries. 6.Small and medium-sized companies represent 99.7% of all companies in Germany and employ almost 80% of all employees. 7.Medium-sized companies in Germany have a much larger influence on the national economy than small companies. 8.More than 340,000 German SMEs benefit from exports to global markets. 9.German SMEs are highly active in research and development, creating competitive “Made in Germany” innovation. 10.The German government strongly supports innovation created by small and medium-sized companies – welcoming foreign investors as well. Prof. Dr.-Ing. Kai Lucks
  • 33.
    Germany’s small andmedium-sized companies (Mittelstand) experience a strong reputation globally. Prof. Dr.-Ing. Kai Lucks
  • 34.
    Small and medium-sizedcompanies are the social and economic backbone of the German economy. With about 3.6 million registered small and medium sized companies (SME), the German Mittelstand comprises 99.7% of all enterprises. These companies each employ a staff of less than 500 employees Almost 21 million people in Germany work for SMEs. With a share of 79.6% of all employees, the German Mittelstand is a major employment driver. German SMEs contribute strongly to the national economy’s success. Their share of net value added amounts of 51.3%*. Note: data refer to 2009, *ifm estimation; Source: IfM Bonn 2012 Prof. Dr.-Ing. Kai Lucks
  • 35.
    By European comparison,Germany’s SMEs are highly efficient at moderate labor costs. Prof. Dr.-Ing. Kai Lucks
  • 36.
    German enterprises arethe foundation of manufacturing among medium-sized companies in the EU Gross value added of medium sized enterprizes in EU Manunfacturing 2009 in % Note: *companies with 50 to 250 employees according to EU-definition, **2008 data; Source: Eurostat 2012 Prof. Dr.-Ing. Kai Lucks
  • 37.
    Germany’s medium-sized companieshold the top position in many of the EU’s manufacturing industries. Gross value added of Medium-Sized Enterprises* in selected EU manufacturing industries (2009, in %) * Note: *companies with 50 to 250 employees according to EU-definition, 2008 data; Source: Eurostat 2012 Prof. Dr.-Ing. Kai Lucks
  • 38.
    Small and medium-sizedcompanies represent 99.7% of all companies in Germany and employ almost 80% of all employees. Economic Influence of German SMEs by Share of … (2009) Source: Federal Statistical Office 2011, ifm Bonn 2011 Prof. Dr.-Ing. Kai Lucks
  • 39.
    Medium-sized companies inGermany have a much larger influence on the national economy than small companies. Medium-Sized* Companies in Germany (2009) Note: *Medium-sized companies employ between 10 and 499 employees and generate an annual turnover between EUR 1-50 m, according to ifm-definition. Small companies employ up to 9 employees and generate a turnover of up to EUR 1 m. Source: Federal Statistical Office 2011 . Prof. Dr.-Ing. Kai Lucks
  • 40.
    More than 340,000German SMEs benefit from exports to global markets. Exporting SMEs in Germany by Sector (2009) German SMEs generated an export turnover of EUR 177 bn in 2009. More than 78% of that turnover was realized in manufacturing and wholesale & retail trade. More than 41% of all medium-sized enterprises in Germany benefit from global markets through exports. Almost 12% of their turnover comes from business abroad. Export activities of German companies are strongly promoted by governmental organizations, e.g. Germany Trade & Invest. Source: ifm Bonn 2011, Federal Statistical Office 2011 Prof. Dr.-Ing. Kai Lucks
  • 41.
    German SMEs arehighly active in research and development, creating competitive “Made in Germany” innovation. R&D Expenditures and Number of Personnel in SMEs (< 500 employees) Note: *CAGR = compound annual growth rate, Source: Stifterverband 2012, IW Dienst 2011. Prof. Dr.-Ing. Kai Lucks
  • 42.
    The German governmentstrongly supports innovation created by SME companies – welcoming foreign investors as well. Source: Federal Ministry of Economics and Technology Prof. Dr.-Ing. Kai Lucks
  • 43.
    The Internal Conditionsfor M&A Have Improved But External Barriers Have Increased Prof. Dr.-Ing. Kai Lucks
  • 44.
    The ‚German Mittelstand‘is different American SME Company German ‚Mittelstand‘ Huge homogenious home market Smaller national home market Shorter term performance orientation Long term performance orientation Open to M&A M&A largely seen as risk Long term R&D seen as risky Dedicated to long term orientated R&D MBO, MBI more frequently Family succession preferred Present in a few different national markets Present in 10 out of 27 different national markets One (few) country governance systrem Multi-country governance system Low cost source in Mexico at 1000 miles away Low cost country at 100 km distance Prof. Dr.-Ing. Kai Lucks
  • 45.
  • 46.
    German M&A MidmarketDeal Index MidMax Market peaked in 2007 – afterwards coming down by 70 % (deals) / down by 47% (index) Prof. Dr.-Ing. Kai Lucks
  • 47.
    The German MidM&A market shows little density and is less mature than other leading markets high NDL USA GBR Maturity in M&A GER Density in M&A Source: MMI Analysis Prof. Dr.-Ing. Kai Lucks high
  • 48.
    The German Mittelstandis Active in China – and Vice Versa 5.000 German Companies having manufacturing activities in China 6.000 Chinese Companies operating in Germany Prof. Dr.-Ing. Kai Lucks
  • 49.
    Auch kleinere Projektekönnen komplexe Herausforderungen darstellen: Beispiel: Hybridmodell bestehend aus Projektstufen und durchgängigen Prozessen Strategy Check Path Screen Exploration Due Diligence Busin. Case Contracts 1 Information Process 3 Measures Planning Process 4 Valuation Process 5 Communication & Change Process 6 100 Days. Legal Process 2 Integr Prep. Controlling Process Negotiation Permission Readiness at Closing Prof. Dr.-Ing. Kai Lucks One Year
  • 50.
  • 51.
    10 Reasons forBavaria 1. An unmatched location in Central Europe 2. Gateway to Central and Eastern Europe 3. Most modern energy, transportation and telecommunications infrastructure 4. Highly-qualified, motivated employees 5. World-renowned universities and research institutions 6. High-tech clusters with a bright future 7. Strong business partners 8. Pro-active economic policies 9. Targeted support services for potential investors 10. Work where others vacation Prof. Dr.-Ing. Kai Lucks
  • 52.
    Stable German Economy •Strong expansion after Financial crisis in 2011 continued. • Dynamic economic growth of 3,7% in 2010 and 3% in 2011. • State institution‘s consumption stable, at year-end 2011 slightly reduced. • National demand becoming an important growth motor in 2011. • Employment situation with continuous positive development. Prof. Dr.-Ing. Kai Lucks
  • 53.
    Important Foreign Investmentsin Germany • Worldwide important investment location. No 5 worldwide (2010) • Greenfield new investments on high level and stable • Between 2000 and 2009 steady annual growth of foreign direct investments: +5% p.a. • Most important industries for foreign investments: Information & communication technologies, software & services, automotive, machine building, chemistry. Prof. Dr.-Ing. Kai Lucks
  • 54.
    Growing Foreign Tradefrom Germany • Demand from established exportation goods customers (EU, USA) slightly shrinking. Asian requests for German quality steadily growing • Especially expectations for consumer goods continue to be positive for foreign trade • Exports growing double digit in 2010, in 2011 +8,2%. Prognosis for 2012 growht stable but smaller • Qualitatively high value and specialized products of German companies ensure strong position in global export markets Prof. Dr.-Ing. Kai Lucks
  • 55.
  • 56.
  • 57.
  • 58.
  • 59.
  • 60.
    Bavaria in Facts& Figures • Bavarian GDP of € 444.8 Bio is larger than those of 20 of the EU 27 member states • GDP per capita amounts to € 35.530 – well above Germany • Main Hubs are Munich and Nuremberg – two of the world top-ranked metropolitan areas • Bavaria‘s business community shows a great diversity of size and sector: Allianz, Siemens, BMW, Audi, EADS, Adidas, Puma and MAN & large number of Small & medium enterprises • Service sector constitutes an especially strong part of Bavaria‘s business community: largest German insurance community, second largest banking one • Tourism: one of the world‘s favorite places to visit • State‘s infrastructure – high capacity, ultra-reliable grids for transportation, highways, telecommunication and energy • Education, research and development: more than 3% of Bavaria‘s GDP goes to R&D Prof. Dr.-Ing. Kai Lucks
  • 61.
    Bavarian Exports andImports with China Bavarian imports from China Bavarian exports to China in million Euro in million Euro 14000 11800 10558 10000 10000 8000 6746 8000 7206 11156 8842 6916 6000 5641 6000 4000 12816 12000 11643 12000 13692 14000 14214 4960 3824 4000 2000 2000 0 0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Source: Chamber of Industry and Commerce of Bavaria Prof. Dr.-Ing. Kai Lucks Seite 61
  • 62.
    Bavarian Exports andImports with Hongkong Bavarian imports from Hongkong Bavarian exports to Hongkong in million Euro 1000 865 900 800 929 500 407 400 749 559 617 359 348 696 700 600 in million Euro 307 594 300 273 500 268 217 400 200 300 200 100 100 0 0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Source: Chamber of Industry and Commerce Prof. Dr.-Ing. Kai Lucks Seite 62
  • 63.
    Technology Cluster InitiativeBavaria Mobility Material Development Mankind and Environment Infotec & Electronics Services & Media Automotive New Materials Biotechnology Infocom Technology Financial Services Rail Chemistry Medical Technology Sensors Media Logistics Nanotechnology Energy Power Electronics Environmental Mechatronic Automation Aerospace Forest & Wood Nutrition Source: Bavarian Financial Institute Prof. Dr.-Ing. Kai Lucks
  • 64.
  • 65.
  • 66.
    There are DifferentPromising Market Entry Paths to Germany Green field Brown field 2nd tier component supplier 1st tier /system supplier OEM & Brands M&A Prof. Dr.-Ing. Kai Lucks
  • 67.
    Coverage of theValue Chain: Building up Strategic Positions Driver for national market share from business start… Global License Sourcing National Suppliers R&D Assembly Manufact Distributors Third party Sales Own Components Own Patents Manufacturing Salesforce Service Own Fleet …to building up of national lead positions Prof. Dr.-Ing. Kai Lucks 67
  • 68.
    Market Positions versusEarning Positions ++ Average earnings from business M&A-entry resulting in profitable No3-position 0 0 Nr. 1 Nr. 2 Nr. 3 Organic market entry stimulated by price wars and ending in undercritical market shares Nr. 4 and worse Market position Attractive results only through market positions from No1 to No 3 Siemens Database – MMI Analysis Prof. Dr.-Ing. Kai Lucks 68
  • 69.
    The German ‚Mittelständler‘is Tied Into a Dense Network Social Network Industry Community State‘s Organizations BDI Germany Invest Unions Cities & Areas Competitive Cluster Car Makers Manufact Automat Industrie Verbände SME Suppliers Invest in Bavaria 10.000 Consultants 1000 M&A Boutiques Services Network Fraunhofer Hochschulen Clients Max Planck Elite Universities Value Chain Network Universities‘ Network R&D Network Foreign enterprises can only be successful if they tie into this network Prof. Dr.-Ing. Kai Lucks
  • 70.
    Why to AcquireCompanies from the German ‚Mittelstand‘? 1. Huge amount of target companies (1 Mio companies with sales up to 5 Mio € .- 100.000 companies with sales of 5-25 Mio € .- 20.000 companies with sales of 26-49 Mio € .- 7.000 companies with sales of 50-250 Mio €) 2. SMEs represent 99.7% of all companies in Germany and employ almost 80% of all employees 3. More than 340,000 German SMEs benefit from exports to global markets. Many global market leaders (niches and specialties) 4. German SMEs are long term business orientated and highly active in R&D, creating competitive “Made in Germany” innovation 5. Typically present in a multitude of countries (27 EU member states), having structures and systems to cover different markets 6. Access to East European low cost suppliers and subsidiaries (wage differences 10:1) at distances of a few 100 km 7. Investing in German SMEs could enable them to enter into the US and Chinese markets: attractive complementarity of interests Prof. Dr.-Ing. Kai Lucks
  • 71.
    Invest in Bavaria GermanFederal M&A Association Bismarckstraße 24 a.mueller@bm-a.de Friedberg 61169 Deutschland e Pippinstraße 10 D 82131 Gauting Germany Prof. Dr.-Ing. Kai Lucks President‘s Office: Mrs. Simone Schnell Phone +49 6031 7386-18 Fax +49 6031 7386info@bm-a.de Pippinstraße 10 D 82131 Gauting Phone: +49 89 89328592 Fax: +49 89 89306240 info@merger-mi.de

Editor's Notes

  • #52 An unmatched location in Central Europe Bavaria’s ideal geographical location and its role as a key hub of international trade affords quick and easy access to all European markets. Located in the very heart of the European Economic Area (EEA) with nearly half a billion consumers, companies based in Bavaria are ideally placed to access new EEA markets. Gateway to Central and Eastern Europe For centuries Bavaria has had close political and economic relations with the countries of Central and Eastern Europe (CEE). Particularly since the enlargement of the EU to the East, Bavaria has established itself as the node between East and West. Most modern energy, transportation and telecommunications infrastructure Bavaria’s advanced infrastructure offers investors maximum mobility and flexibility. Be it rail, road, water or air – Bavaria guarantees the speediest possible transport of passengers and goods. Efficient, reliable data and information exchange is ensured by innovative, state-of-the-art information and communications technologies. Highly-qualified, motivated employees Only highly qualified and motivated staff with visions and commitment enable companies to produce top quality products and services of worldwide repute. Bavaria’s excellent universities and its unique system of dual vocational training combining theory with on-the-job training for non-academic professions ensure maximum workforce competence. World-renowned universities and research institutions 11 universities, 17 universities of applied sciences, 11 Max Planck Institutes and 9 institutes of the Fraunhofer Society make Bavaria a world leader in research and development. It also hosts 3 of the 15 German Helmholtz research centers. Bavaria therefore offers the ideal set-up for the development of new technologies and innovative products and services, a reason for Bavaria’s top ranking in German patent registrations. High-tech clusters with a bright future Bavaria enjoys a leading position – nationally and internationally – in key technology sectors such as information and communications technology, biotechnology, energy and medical technology as well as satellite navigation. The state government’s Cluster Initiative “Alliance Bavaria Innovative” promotes intensive networking of industry and academia and gives high-tech companies the opportunity to share know-how and develop innovative solutions. Strong business partners Bavaria is the home of global players like Adidas, Audi, BMW, EADS, MAN or Siemens. About one third of the 30 companies listed in the DAX share index are based in Bavaria. In addition, there is a dense network of small and medium-sized industrial, trade and service companies throughout the state – thus providing a broad spectrum of innovative suppliers, customers and potential partners for investors. Work where others vacation Bavaria is Germany’s favorite holiday and tourist destination and enjoys worldwide appeal. Its breathtaking scenery, rich culture and the proverbial Bavarian way of life attract even the most discriminating, sophisticated professionals and top professionals. Investing, working and living where others go on vacation – that is Bavaria. Pro-active economic policies “New products, new businesses, new markets” is the guiding principle of Bavaria’s economic policy. State government and administration policies are dedicated to enterprise-friendly administrative procedures, especially for SMEs, attractive employment conditions and reliability in partnership with business to ensure Bavaria’s global competitiveness. Targeted support services for potential investors Invest in Bavaria is the central, single-stop point of contact within the Bavarian Ministry of Economic Affairs for all companies interested in setting up and expanding business units in Bavaria. Our team responds promptly to their specific information, advisory and support requirements