the economic power of the deutsche mittelstand
DESCRIPTION
In den USA haben sich in den letzten Jahren 7.000 Unternehmen von der Börse verabschiedet. Für sie ist der deutsche Mittelstand ein Beispiel zur internationalen AusrichtungTRANSCRIPT
Prof. Dr.-Ing. Kai Lucks
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
Source: FT-Hogan Lovells survey of global firms November 2012
Outlook on Global Firms 2013: M&A Has Lost its Top Priority
Prof. Dr.-Ing. Kai Lucks Seite 5
Source: Chamber of Industry and Commerce
The 21 Leading Export Nations in 2011Exports in billion USD
1899
1481 1474
823
660597 555 523 522
476 473 456 452 410365 350 308
297 297 285 226
0
200
400
600
800
1000
1200
1400
1600
1800
2000
– Bavaria is in place 26 among the large export nations
– The export quota in the Munich region is 60 %
Prof. Dr.-Ing. Kai Lucks
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
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Germany
France
Spain
Portugal
Italy
UK
Argentina
Norway
New Zealand
Victoria
Chile California
Alberta
Sweden
The European Diversity is a Result of Different Ways to Deregulation of Markets
Prof. Dr.-Ing. Kai Lucks
Source: FT-Hogan Lovells survey of global firms November 2012
How is Economic and Political Uncertainty in the EurozoneImpacting on Your Plans for Growth?
Prof. Dr.-Ing. Kai Lucks
Europe is the Most Important Trading Partner for the US
“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.
USA EUCHN
Inter continental trading volume 2012 up to September:
485 Bio US$390 Bio US$
200 Bio US$79 Bio US$
US Exports 2012 up to September:
Source: New York Times By Jack Ewing, November 25, 2012
Prof. Dr.-Ing. Kai Lucks
Deal Drivers: 2013 Expectations vs. Last Year‘s Results
2013 M&A increasingly driven by depressed valuations and a glut of high-quality assets
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 cross-border M&A Market should continue
Most attractive regions for acquisitions
Source: Freeman Consulting Services & Thomson Reuters, November 2012
Prof. Dr.-Ing. Kai Lucks
North Track
South Track
Core
Core
North Track
South Track
Eastern Sphere
Eastern SphereWestern Sphere
Western Sphere
Center Block
From a User Economics View Europe is Diverse in (a) Structure, (b) Profitabilities, (c) Buyer Segments & (d) Labour Costs
MMI Analysis
Prof. Dr.-Ing. Kai Lucks
Germany
Prof. Dr.-Ing. Kai Lucks
The Federal Republic of Germany
Prof. Dr.-Ing. Kai Lucks
The German Neighborhood
Prof. Dr.-Ing. Kai Lucks Page 20
Statistical Figures
Space01.01.2011
Inhabitants30.06.2011
GDP 2010
Jobless2011
Consump-tion Index
2012in km2 in % in
Mio.in % in Mrd.
€in %
Federation 357. 100 82. 100 2.500 100 7,1 % 100,0
Bavaria 71. 20 13. 15 442 18 3,8 % 108,7
Upper Bavaria
18. 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
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
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
Big Companies > 500 >= 250 500
Source: Statistisches Bundesamt, Umsatzsteuer Fachserie 14 Reihe 8.- ifm Bonn 2002.- Estimations of MMI
Potentials of German Companies
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.
Note: data refer to 2009, *ifm estimation; Source: IfM Bonn 2012
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
German SMEs contribute strongly to the national economy’s success. Their share of net value added amounts of 51.3%*.
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.
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.
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.
Exporting SMEs in Germany by Sector (2009)
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
GER
Maturity in M&A
Density in M&A
high
high
USAGBR
NDL
The German Mid M&A market shows little density and is less mature than other leading markets
Source: MMI Analysis
Prof. Dr.-Ing. Kai Lucks
6.000 Chinese Companies operating
in Germany
5.000 German Companies having
manufacturing activities in China
The German Mittelstand is Active in China – and Vice Versa
Prof. Dr.-Ing. Kai Lucks
Auch kleinere Projekte können komplexe Herausforderungen darstellen:
Path Screen
Explo-ration
Due Dili-gence
Busin. Case
Integr Prep.
100 Days.
Con-tracts
One Year
Information Process
Measures Planning Process
Communication & Change Process
Controlling Process
Valuation Process
Legal Process
Negotiation Permission
Readiness at Closing
1
2
3
4
5
6
Beispiel: Hybridmodell bestehend aus Projektstufen und durchgängigen Prozessen
Strategy Check
Prof. Dr.-Ing. Kai Lucks
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
• 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.
Stable German Economy
Prof. Dr.-Ing. Kai Lucks
• 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.
Important Foreign Investments in Germany
Prof. Dr.-Ing. Kai Lucks
• 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
Growing Foreign Trade from Germany
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
• 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
Bavaria in Facts & Figures
Prof. Dr.-Ing. Kai Lucks Seite 61
Source: Chamber of Industry and Commerce of Bavaria
Bavarian Exports and Imports with China
3824
5641
67467206
11643
4960
14214
0
2000
4000
6000
8000
10000
12000
14000
2005 2006 2007 2008 2009 2010 2011
Bavarian exports to China in million Euro
6916
8842
10558
1180011156
1281613692
0
2000
4000
6000
8000
10000
12000
14000
2005 2006 2007 2008 2009 2010 2011
Bavarian imports from China in million Euro
Prof. Dr.-Ing. Kai Lucks Seite 62
Source: Chamber of Industry and Commerce
Bavarian Exports and Imports with Hongkong
559
696749
594
865
617
929
0
100
200
300
400
500
600
700
800
900
1000
2005 2006 2007 2008 2009 2010 2011
Bavarian exports to Hongkong in million Euro
348
407
359
273
217
268
307
0
100
200
300
400
500
2005 2006 2007 2008 2009 2010 2011
Bavarian imports from Hongkongin million Euro
Prof. Dr.-Ing. Kai Lucks
Technology Cluster Initiative Bavaria
Mobility Material Development
Mankind and Environment
Infotec & Electronics
Services & Media
Automotive New Materials
Biotech-nology
Infocom Technology
Financial Services
Rail Chemistry Medical Technology
Sensors Media
Logistics Nano-technology
Energy Power Electronics
Aerospace Environ-mental
Mechatronic Automation
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
Green field Brown field
M&A
OEM & Brands
1st tier /system supplier
2nd tier component
supplier
There are Different Promising Market Entry Paths to Germany
Prof. Dr.-Ing. Kai Lucks 67
Coverage of the Value Chain:Building up Strategic Positions
Sourcing R&D Manufact Sales Service
Global
National Suppliers
Own Patents
License Assembly
ComponentsManufacturing
Distributors
Own Salesforce
Third party
Own Fleet
from business start…
…to building up of national lead positions
Driv
er fo
r na
tiona
l mar
ket s
hare
Prof. Dr.-Ing. Kai Lucks 68
Market Positions versus Earning Positions
Attractive results only through market positions from No1 to No 3
Average earningsfrom business
Nr. 1 Nr. 2 Nr. 3 Nr. 4and worse
0
Market position
++
0
-
Organic market entry stimulated
by price wars and ending in
undercritical market shares
Siemens Database – MMI Analysis
M&A-entry resulting in profitable No3-position
Prof. Dr.-Ing. Kai Lucks
Industry Community State‘s OrganizationsSocial Network
Universities‘ Network R&D NetworkValue Chain Network
Services Network
Competitive Cluster
The German ‚Mittelständler‘ is Tied Into a Dense Network
Industrie Verbände
BDI
Cities & Areas
Car Makers
Manufact Automat
Unions Germany Invest
Invest in Bavaria
10.000 Consultants
1000 M&A Boutiques
Suppliers
Clients
Fraunhofer
Max Planck
Hochschulen
Elite Universities
SME
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
e
Invest in Bavaria
German Federal M&A AssociationBismarckstraße 24Friedberg 61169Deutschland
President‘s Office: Mrs. Simone SchnellPhone +49 6031 7386-18Fax +49 6031 [email protected]
Pippinstraße 10D 82131 GautingGermany
Pippinstraße 10D 82131 GautingPhone: +49 89 89328592Fax: +49 89 [email protected]