A GUIDE TO ‘MITTELSTAND’ TRANSACTIONS
WHAT ARE THE MAIN CHARACTERISTICS OF A
MITTELSTAND as defined by the Institute for Mittelstand-studies in Bonn describes predominantly family-owned German companies that have between 10 and 500
employees and a sales volume of up to b50m. per year.
However, more important than those numbers is the
structure of the companies.
Most companies that belong to the German
Mittelstand are not only family owned but also family
run, as the same family members that own the
companies are also managing directors. Furthermore,
those businesses are often still run by their founders.
Such family companies can grow well beyond the
figures given above and still be considered Mittelstand
due to their structure. For instance, Dr. Oetker KG has
far outgrown the numbers given above with around
24.500 employees and a sales volume of approximately
b8bn – and is globally known for its traditional Dr.
Oetker food products and its Jever beer – but still
maintains a family controlled structure.
Another characteristic of the Mittelstand is that a
WHY ARE THESE SMALLER COMPANIES SO ATTRACTIVE TO
considerable amount of its companies occupy a
particular market niche and lead the world market with
a very specific outstanding product. For example,
Webasto AG is one of the biggest automobile
component suppliers in the world; it employs 8500
people and has a total sales volume of roughly b2bn.
Webasto is mostly recognized for its expertise in park
heating systems, where it is considered to be the world
An impressive 99.6% of the roughly 3.2 million
German businesses liable to sales tax are considered
Mittelstand according to the defining characteristics
mentioned above. They account for around 40% of the
national turnover and provide 60% of the jobs in
Mittelstand companies have effectively capitalised on
their ability to corner local markets; efficiently
transforming their small focused companies into
suppliers of niche products to the world. Further
examples for such world leaders on niche markets are
Kärcher (high-pressure cleaners), Mühle (shaving
brushes) and Aeroxon (flycatchers).
WHAT ARE THE CHALLENGES INVOLVED IN DEALING WITH A
MITTELSTAND TRANSACTION COMPARED TO A VANILLA
When dealing with Mittelstand businesses quite a few
peculiarities have to be taken into account.
Often, the founders of the companies, or their
descendants, are still the respective managing directors
and/or owners. So the process of selling such a
company will not always be about facts and figures but
also about points that may seem somewhat irrational to
an outsider. The transfer can become personal, moving
beyond the basics of the company to touch on the
lifework of a seller who does not want to see this work
to be discredited.
The deep ties between a seller like this, and the
company that is being sold, can lead to further
complications. In many cases, the founding owner is
also the proprietor of goods and rights that are
essential to the company including patents, licenses or
real estate. This has to be taken into account for the
transfer. In order to not buy an empty shell, the deal
has to include all of those essentials held by the founder
of the company.
Moreover, the structure of the personnel has to be
analysed closely. It is a habit of Mittelstand owners to
employ family members pro forma. That way they can
hand out tax-deductible money to relatives and friends.
When analyzing the management structure of
Mittelstand businesses, it is regularly discovered that in
order to achieve lean management, companies