Apple supplier Manz, waste-to-energy company EEW, and machinery manufacturer Aixtron: More and more German companies are being acquired by Chinese firms. According to an analysis by the consulting firm Ginkgo Tree Advisors, 36 German companies were acquired by Chinese firms last year—up from 30 in 2014.
What’s striking is that these are mostly companies with revenue in the hundreds of millions of euros. So are smaller companies not on the radar of Chinese investors? “Foreign investors, such as those from China, are also increasingly interested in well-positioned smaller German SMEs with revenue between two and ten million euros,” says Tilman Eckert of K.E.R.N – The Succession Specialists. This is particularly true when these companies possess strong technical expertise, such as in the fields of robotics, automation, and Industry 4.0.
Andreas Feege, a China expert at KPMG Germany, shares this view. “Interest from Chinese investors has risen immensely this year. The amounts invested are significantly higher than last year’s figures. This is, of course, also linked to the government, which has spoken out in favor of more foreign investment to technologically upgrade its own economy. In a sense, renewal is being driven from the outside. At the same time, Chinese companies are securing access to new markets or expanding their market shares there.”
According to experts, some smaller companies are also likely to attract Chinese interest in the future. KPMG’s Feege says: “Smaller firms become targets for Chinese investors when they possess specialized skills or have established themselves in interesting niches.” This primarily applies to companies in the industrial sector—including suppliers—as well as IT-focused firms.
In this regard, smaller German companies can therefore benefit from new investors. For example, owners can sell their companies to an investor at a good price if they lack succession plans. According to M&A experts, there are now even cases where multiple Chinese investors are bidding for the same company. “In any case, competition from Chinese companies in the German market is growing. And that’s nothing but an advantage for smaller companies,” says Feege.
But it’s not just Chinese investors who are currently very active in the German market. Bernhard Kluge of Business Broker has observed for some time that Swiss companies are acquiring German firms—especially in the IT sector—not only in areas near the border. “The strong Swiss franc and the weak euro are fueling this trend.”
How should German companies prepare if they want to be acquired? Do they need to start cramming to learn Chinese right now? “The investor’s language doesn’t play a decisive role. At the management level, a lingua franca can usually be found quickly if necessary,” says China expert Feege.
Foreign investors also tend to proceed with sensitivity. “In many cases, Chinese investors allow the existing management to operate largely independently, provide the necessary investments for modernization, and secure jobs, while business relationships with China are expanded through connections to the Chinese investor,” says KPMG’s Feege. “However, cultural differences are a factor to consider. So far, it has become apparent that deadlines for payments and the submission of documents have sometimes not been met. This was less a matter of intent than of coordination difficulties, but it nevertheless resulted in unnecessary costs.”
