GERMANY
Germany is a global leader in various technology sectors and a well sought-after and internationally significant investment location for global enterprises. It is the largest and most productive European country and despite a relatively low population of 80 million, the German economy ranks #4 worldwide behind USA, China, and Japan.
In the industrialized world Germany proved to be alongside Austrialia particularly resistant to crisis. Germany was the first country to overcome the aftermath of the financial crisis in 2007 and was able to regain by 2010 its economical performance at the level before the crisis and even increased it in the years afterwards. On a per capita GDP basis, Germany was able to continuously increase its advance over other European countries in recent years. Germany’s role as economical and political leader in the EU will continue to grow in the future. The Brexit is likely to further accelerate this development.
Apart from well-known globally leading technology sectors such as the automotive industry, mechanical engineering, and the environmental technology sector, there are numerous enterprises that are only known to industry mavens, however, turn out to be true hidden champions.
Mostly these companies are mid-sized, family-run enterprises that are not listed on the stock market. In Germany so-called mid-sized enterprises include companies with more than 500 million € in annual revenues.
Due to German history there is one topic that is not politically promoted in Germany – yet it is of significance. Germany has a very powerful and technologically advanced defense industry. Presently Germany is the third largest exporter of arms behind USA and Russia.
For Chinese investors German mid-sized enterprises are most interesting take-over targets, no matter whether in part or as a whole. Investors from China bring de facto the largest market of the world to the table – access to China and Asia. By acquisition they obtain global leading technologies in many industries.
Of course the German federal government is interested in further strengthening the technology and business location Germany. Ever since the 1950s Germany has been pursuing the success model of the free market economy and is addressing the current challenges of globalization.
Therefore there are no political obstacles for Chinese investors when acquiring German companies as long as they strive for long-term securing and expanding the companies in Germany.
When acquiring a majority stake in or the complete shares of a company the acquisition has to be approved by the Federal Cartel Office (FCO). The Federal Cartel Office is an independent antitrust authority for protecting the competition in Germany. The FCO approval is solely based on criteria ensuring free competition. The aim is always to prevent the formation of market dominating monopolies and to ensure free competition in every industry sector of the market. Politically the protection of the competition is documented in the “Law against Competition Restrictions“.
CMIT
Most of the entrepreneurs and investors from China are not intimate mavens of the German economy and culture. Very few German owners of mid-sized companies have experience in working with Chinese enterprises.
Accordingly, the initial steps for identifying interesting companies and approaching them for the first time are very hard and require perfect preparation. The subsequent sales process must be professionally planned and implemented, involving all partners and the German authorities.
CMIT and its partners support Chinese investors identifying and selecting target companies, obtaining relevant company figures, calculating company valuations, and independently engage in the initial discussions with the shareholders of a target company. Based on these discussions a project plan for the acquisition of the company will be coordinated with the Chinese investor. According to the CMIT model all services of CMIT, the investor, and the target company are stipulated in this project plan and put into a time line. The typical time frame from initial contact to closing the acquisition of the company usually spans over 6-12 months. CMIT is in charge of the project management and is also responsible for the quality management of the sales process.
The Chinese investor enters the cooperation with CMIT with a non-binding statement of interest, providing initial information on the investor itself and the description of a target company in Germany. Based on this information CMIT will conduct a market research identifying potential target companies and also pointing out possible alternatives. In case of interest in an acquisition from the Chinese investor, an NDA document will be signed and the investor and CMIT will enter a cooperation agreement, defining the further cooperation process.