Financing of major family businesses is long-term, stable and independent

Building up equity and avoiding financial risks are the guiding principles of Germany’s largest family businesses.

Around 48 percent of family businesses with annual sales of at least €50 million have raised their equity base in the last three years of low interest rates. This is just one of the findings of the 2015 spring survey of Germany’s largest family businesses. The Institut für Mittelstandsforschung (IfM) Bonn was commissioned by the BDI and the Deutsche Bank to survey 400 of the 4,500 largest family businesses in Germany, i.e. those with annual sales of at least €50 million. The financing strategies of the largest family businesses are geared towards security and independence. The motives given by these businesses for raising their equity capital in the last three years are to improve their financial stability (87 percent) and to make them more independent (73.7 percent). Restrained response of family business leaders to current low interest rates More than half (53.1 percent) of those surveyed were of the opinion that financing options have increased overall within the last three years. Around 50.7 percent of the largest family businesses believe that competition among lenders has increased. Around 55 percent of the largest family businesses have not, however, expanded their investment volume in response to the low interest rates. They justified their restraint as a reluctance to increase their debt-equity ratio and the fact that attractive investment targets are in short supply. The low interest rates are also impacting on the pension costs of businesses. Around one third of the largest family businesses have had to set aside additional funds for pension provisions in the last three years. The largest family businesses Six out of every ten family businesses surveyed operate in industry, just over one quarter in commerce and about every seventh business in the service sector. In 2014, the surveyed businesses recorded average annual sales of €369 million. Every second major family business generated sales of €120 million or more. Just under four of every ten businesses generate less than €100 million in sales per year. The largest family businesses rate their economic situation as good. Two-thirds of family businesses (66.1 percent) anticipate good or very good business prospects in the next twelve months. Just under a third is expecting satisfactory business prospects. Alongside financing, family businesses were also asked about internationalisation and risk management. Around 48 percent of family businesses with annual sales of at least €50 million have raised their equity base in the last three years of low interest rates. This is just one of the findings of the 2015 spring survey of Germany’s largest family businesses. The Institut für Mittelstandsforschung (IfM) Bonn was commissioned by the BDI and the Deutsche Bank to survey 400 of the 4,500 largest family businesses in Germany, i.e. those with annual sales of at least €50 million. The financing strategies of the largest family businesses are geared towards security and independence. The motives given by these businesses for raising their equity capital in the last three years are to improve their financial stability (87 percent) and to make them more independent (73.7 percent).
Restrained response of family business leaders to current low interest rates
More than half (53.1 percent) of those surveyed were of the opinion that financing options have increased overall within the last three years. Around 50.7 percent of the largest family businesses believe that competition among lenders has increased. Around 55 percent of the largest family businesses have not, however, expanded their investment volume in response to the low interest rates. They justified their restraint as a reluctance to increase their debt-equity ratio and the fact that attractive investment targets are in short supply. The low interest rates are also impacting on the pension costs of businesses. Around one third of the largest family businesses have had to set aside additional funds for pension provisions in the last three years.


The largest family businesses
Six out of every ten family businesses surveyed operate in industry, just over one quarter in commerce and about every seventh business in the service sector. In 2014, the surveyed businesses recorded average annual sales of €369 million. Every second major family business generated sales of €120 million or more. Just under four of every ten businesses generate less than €100 million in sales per year. The largest family businesses rate their economic situation as good. Two-thirds of family businesses (66.1 percent) anticipate good or very good business prospects in the next twelve months. Just under a third is expecting satisfactory business prospects. Alongside financing, family businesses were also asked about internationalisation and risk management.