| BUSINESSWEEK ONLINE : DECEMBER 6, 1999 ISSUE | ||||||||
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| INTERNATIONAL BUSINESS
Commentary: Germany Should Get Over Its Takeover Phobia The folks in the southern German city of Bietigheim-Bissingen have been making floor tiles so long that the local art museum specializes in prints by artists who etched their designs on linoleum. So naturally the 40,000 residents were apprehensive when U.S.-based Armstrong World Industries Inc. last year bought DLW, a century-old local maker of floor coverings. Maybe the Americans would do something awful, like move the company's factory to Asia. ''We were skeptical and afraid,'' admits Rainer Philipsen, head of DLW's workers council. A year later, Philipsen sees the takeover as ''thoroughly positive.'' Contrary to expectations, Armstrong didn't force massive layoffs at DLW. Instead, it offered the company better access to international markets. ''Now, we belong to a strong group and have a chance to be on top worldwide,'' Philipsen says. In the supercharged atmosphere of German politics these days, it's easy to overlook such examples of successful cross-border mergers. Judging from the rhetoric of politicians, including Chancellor Gerhard Schroder, foreigners are about to pillage Corporate Germany and ruin German employment. To them, British company Vodafone AirTouch PLC's (VOD) bid for Dusseldorf-based Mannesmann (MNNSY) is the most egregious example of the planned assault. In response, Schroder has threatened to erect roadblocks to hostile takeovers. Yet while the politicians bluster, many German businesses are quietly passing into foreign hands. Foreigners spent $16 billion buying German companies in 1998 and $13 billion in 1997. Some Germans are frightened. But others realize that local employers face uncertain prospects if they go it alone in an increasingly competitive world. So they're ditching their pride in the interest of survival. And despite Schroder's rhetoric, Germany is actually getting to be an easier place to execute takeovers. A new law will eliminate limitations on shareholder voting rights in June. Meanwhile, big banks are gradually selling off their stakes in German companies, making it easier for foreigners to buy in. MELLOWING OUT. The most furious activity is taking place among Germany's Mittelstand, medium-size companies that make everything from auto parts to beer. More than 300,000 Mittelstand, accounting for one-seventh of German employment, face imminent change in leadership, says the Bundesverband mittelstandische Wirtschaft, an industry group. The people who founded such companies after World War II are growing old, and their children aren't always interested in taking over. The solution: sell to the highest bidder, regardless of nationality. As these deals pick up, they're sure to raise fears that Germany is coming under the heel of U.S.-style, slash-and-burn capitalism. But attitudes toward hostile takeovers are mellowing. Opposition is restrained by the knowlege that German companies are making massive acquisitions abroad. According to the Bundesbank, Germans spent $65 billion on foreign acquisitions in 1998, four times what foreign companies spent in Germany. Vodafone's bid is a crucial test of Germany's willingness to tear down the fortress protecting its biggest corporations. By dropping the barriers, big German companies, like the Mittelstand, may find that being taken over has advantages. By Jack Ewing Frankfurt Bureau Chief Ewing covers German industry. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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