A new survey of institutional investors in Germany and the US who collectively manage €44.37 billion of assets, reveals 80% believe the German Government has delivered a much more comprehensive package to support its economy and jobs than other major nations.
The findings are from MBH Corporation plc, a diversified investment holding company listed on the Frankfurt and Dusseldorf Stock Exchanges that acquires successful, well established small to medium sized enterprises across multiple geographies and sectors.
Germany forecasts 4.4% growth in 2021
The German government has forecast economic growth of around 4.4% in 2021, but 40% of professional investors interviewed for the survey think it will be higher than this, compared to 20% who believe it will be lower.
When it comes to investing in Germany and German stocks, 26% of institutional investors expect professional investors to ‘dramatically’ increase their exposure here, and a further 40% expect it to rise slightly. However, like all countries looking to recover from the Covid-19 crisis, Germany will face many challenges. In September, the German government forecast that its economy will shrink by around 5.8% in 2020, but 62% of institutional investors believe it will be higher than this.
It has been predicted that the German economy will recover to pre-pandemic levels by Q4 2021, but MBH Corporation’s research reveals just 28% of institutional investors believe it will achieve this before then, compared to 46% who believe it will take longer than this.
But watch out for Germany’s zombie horde
The German Government’s policy instrument Kurzarbeit, which involves the state subsidising firms to keep employees on their payroll even when not working, has been extended through to the end of 2021, but 84% of institutional investors believe this will help create ‘zombie companies.’ These are firms that should stop trading because they are unprofitable for reasons other than problems caused by the pandemic. One in four (24%) institutional investors interviewed also believe there is a real risk that Kurzabeit could ‘infect’ healthy German firms by removing pressure on them to restructure.
Callum Laing, CEO of MBH Corporation plc, explained:
“The German Government has received praise for the way it has handled the Covid-19 crisis, especially when compared to other leading nations. Our research shows that this has been acknowledged by many institutional investors that have a more positive outlook on Germany and its economy than other leading countries. This could fuel further investment into German companies and stocks. However, like everyone else, Germany faces huge challenges in getting its economy back to pre Covid-19 levels as soon as possible, but they are in a better position than most to achieve this.”
MBH currently has 20 very successful and profitable small businesses in its portfolio and, as part of a continued growth drive, is looking to acquire more companies of a similar nature. MBH targets well-established companies that are predominantly debt free, delivering around GBP0.5m-GBP10m EBITDA and are generally still run by their founders.
By leveraging its unique proprietary strategy, MBH tries to create substantial shareholder value through the consistent and accretive acquisition of excellent companies. Profitable companies convert their private shares into public shares or bonds in MBH Corporation plc in a perpetual earn-in model. Company owners are then incentivised to accelerate their growth trajectory using the resources of the plc including expertise, skill transfer of best in class practices, cross-selling to other group companies and where appropriate, zero cost funding for new growth projects.
Each group company retains its autonomy and follows appropriate corporate and financial governance. Business owners are also incentivised financially to enhance shareholder value through a share bonus scheme aligning their interests with public shareholders.