Post by Wolfgang Hammes

The tragedy of many successful German companies ... being taken over by US players. One of the biggest weaknesses of Germany are its weak and underdeveloped financial markets in general, and its capital markets in particular. When I was working in investment banking, it was evident that there was a huge valuation gap between similar US and German companies. The problem in Germany is that its retirement system is still in the stone ages. There is nothing that comes close to a 401k plan or Roth IRA accounts (which account for USD trillions of inflows into US equity markets). There are also very few institutional players with significant equity investments such as Calpers in the US. For the longest time, Germans have preferred savings accounts and fixed income investments over equity. As a result, it is easy for US players with high valuation multiples to take over innovative but inexpensive German companies. As a result, Germany has lost a large number of small and large companies to foreign bidders. It is a tragedy that German politicians have largely ignored. Even the pride of Germany's daring CO2 reduction crusade, innovative heat pump producer Viessmann, is now owned by a US player. The latest example is Delivery Hero, an innovative German food delivery company with international presence that will become part of US player Uber. Don't get me wrong. I do not criticize the founders of Delivery Hero. They accomplished something extraordinary and deserve my deepest respect and admiration. And sincere congratulations for an attractive "exit." But can Germany continue to lose its industrial, tech, financial, and commercial base? The next exit is likely to be Germany's #2 bank Commerzbank. Where will it end?