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Family scion plans fund to help Mittelstand businesses

Unconfirmed reports suggest Andreas Jacobs, who sits on the board of the Swiss-based Jacobs Holding, a big family investment/foundation group, is poised to set up a fund to help Mitteland businesses in Germany. 

According to a source close to Jacobs, who didn’t want to be named, the German-based son of the deceased billionaire Klaus Johann Jacobs, wants to help Mittelstand businesses facing succession difficulties. 

The news about the potential fund in Germany comes at the same time as a nonprofit group in Texas says it wants to help buy family businesses with succession problems

Analysts say there are numerous privately controlled Mittelstand businesses that struggle with succession difficulties. These difficulties may be due to a lack of suitable candidates within the family to take on the responsibility of managing the family business, or an unwillingness of heirs to take up managerial/ownership responsibility. 

Faced with succession issues, an increasing number of these companies are deciding to sell, often to foreign buyers, who are usually interested in the technology transfer aspect of acquiring them. Many Mittelstand businesses work in highly value-added specialized engineering sectors, where their expertise and technology is prized.  

Nevertheless, there is some concern in Germany that many of these so-called hidden champions could be losing their way. Disruptive forces like the digital revolution are placing considerable pressure on some of them. 

And those unable to secure their future through a willing member of the family to take over running the businesses might feel the best option is to sell why the going is good. Potential buyers are often happy to pay a premium for the best companies. 

Two years ago, the Windhagen-based Wirtgen Group sold to John Deere for more than $5 billion. A few years before, car parts maker Getrag sold for $1.3 billion to Magna, a Canadian company. There have been many other similar deals involving Germany’s Mittelstand businesses in the last five years. 

Details about the Jacob-backed fund remain sketchy, and Jacobs Holdings didn’t respond at the time of publishing with any information. But the fund is probably designed to help these businesses through succession difficulties and ameliorate pressures on them to sell, particularly to foreign buyers. 

Interestingly, Andreas hit the news earlier this year on an issue involving succession. Albert Darboven, who owns the Hamburg-based coffee production company J.J.Darboven, wanted to adopt the businessman and heir to the Jacob fortune to run his company. Darboven had fallen out with his son and felt Andreas, who’s family fortune originally comes from coffee production, would be better placed to preserve the family business. However, a court in Germany blocked Darboven’s request. 

The news about the potential fund in Germany comes at the same time as a nonprofit group in Texas says it wants to help buy family businesses with succession problems. TRTF Community House, a subsidiary of the nonprofit Texas Research and Technology Foundation, is targeting local family businesses with $20 million to $30 million in revenue.  

TRTF wants to give businesses, which face succession difficulties and are looking to sell, the option of being bought by a nonprofit group. Such a deal would allow management and structures to stay in place. 

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