German businesses are increasingly becoming targets for acquisitions
In the midst of Germany's economic downturn, foreign investors show growing interest in snapping up local businesses. If the political powers wish to ward off the shift of substance to other territories, they need to act swiftly.
Soon enough, the guffaws might be coming from foreign shores instead of Germany itself. Plans for seizing control of once-powerful and robust German companies are being put into motion in distant corporate headquarters. The German authorities interpret this as a testament to the strength of German corporations.
However, that's far from the truth! The present situation should serve as a jarring wake-up call for the movers and shakers in Berlin. A slow but steady erosion of sovereignty is fueling, rather than fighting, the economic weakness.
The list of instances keeps growing. The Abu Dhabi-based Arab oil company, Adnoc, plans to acquire the Covestro plastics manufacturer based in Leverkusen for nearly 16 billion euros. Italian bank Unicredit is eyeing the Commerzbank, Germany's second-largest financial institution. The logistics company Schenker, once a lucrative subsidiary for the state-owned Deutsche Bahn, will soon be operating under the Danish flag. The Hessian heating magnate, Viessmann, sold its billion-dollar heat pump business to a U.S. competitor.
Economic Disenfranchisement
The reasoning behind each transaction varies. The buyer of Covestro in Abu Dhabi aims to distance itself from environmentally harmful oil and gas production. Unicredit, the Italian bank, seeks to expand its business in Germany. Deutsche Bahn requires funds, so it sells Schenker. But the reality remains that this ongoing trend is worrisome for Germany's economic location.
While predictions point towards another contraction in Germany's economy this year and the industry reports a significant decrease in orders, the domestic location is experiencing economic disenfranchisement through these consecutive takeovers. In the long term, there's a risk of substance relocation and loss of influence. If profits and control continue to flow abroad, the ability to make independent decisions weaken. At many places, this would translate to the end of strategic independence.
Instead of celebrating the supposed allure of German companies abroad, the German government should be on high alert and take necessary countermeasures. It must deliver on its long-promised promises: reduce taxes, improve depreciation options, cut bureaucracy, address the skilled labor shortage – more and faster than ever before. Otherwise, Germany risks witnessing the sale of its economy.
With the Italian bank Unicredit eyeing a potential acquisition of Commerzbank, the pressure on Germany to act rapidly to retain its economic sovereignty escalates. If successful, Unicredit's move would make Commerzbank, currently Germany's second-largest financial institution, fall under foreign control.
