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Foreign investors are vital to German companies' financial revolution. But the locals are stirring too
BIT by bit, it is becoming less easy to caricature corporate Germany as being stuck in the past. Competitive reality is unsettling the old, cosy relationship between bosses and workers ()see page 44. Corporate governance is becoming a little more transparent. Less obviously, the way German companies are financed--for most of them, a mixture of private, often family ownership and loans from the bank--is changing too.
However, it sometimes seems that foreign private-equity firms are the sole agents of this financial change. Only this week, one such firm, Terra Firma, emerged as the buyer of Tank & Rast, an operator of motorway service stations that is already mostly owned by other private-equity funds. Another private-equity outfit, Lone Star, was set to buy Mitteleuropaische Handelsbank, a subsidiary of NordLB, a public-sector bank. The foreigners' prominence reflects the slowness of German banks, companies and capital markets to re-engineer corporate Germany by themselves.
Studies suggest that companies that open themselves to new sources of finance, whether private equity or new types of debt, benefit from it. One study--co-sponsored, admittedly, by a German private-equity firm--found that a sample of 45 companies that had taken on private equity between 1993 and 1999 grew faster and created more jobs between 1999 and 2003 than those that had not. An annual survey of Mittelstand (essentially, small and medium-sized) companies by Kreditanstalt fur Wiederaufbau, the state development bank, finds that those that took on new debt or equity saw their workforces increase: those that did not, shed employees. Another study, by McKinsey, attributes the relative success of private-equity investors to what it calls "active ownership" and more effective...