Special aspects of negotiating with German medium-sized businesses for Indian investors

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last updated on 22 February 2022 | reading time approx. 2 minutes

  


 

What special issues await Indian companies when they take over or acquire a stake in an owner-managed company in Germany?

Indian enterprises must be aware of the fact that even smaller German medium-sized companies with only a few hundred employees often have a strong presence in international markets and are usually very professionally structured and managed. Compared to India, there are rarely “corporate patriarchs” that make all the detailed decisions themselves.
 
Indian enterprises are usually very hierarchical whereas German businesses rely on strong management that constantly delegates responsibility. Many very important employees do not belong to the owner family. They have often worked for the company for decades and have made a career there climbing the internal ladder.
 
German medium-sized enterprises often define their position centrally through their product technology. Owners will often not particularly emphasise this but they expect a high level of technical awareness from an Indian negotiating partner. “Advertising” your own business is not seen as important as is often the case in India. Companies assume that their products “speak for themselves”.
 
Well-trained employees are very important in the manufacturing sector, as it uses extremely complex technologies in Germany. Blue-collar workers are accordingly highly valued. They have often worked at the company for decades, earn relatively high wages and are seen as a key success factor. They expect and enjoy respectful treatment by owners and management. Good working conditions are of key importance, as it is difficult to recruit enough skilled workers in most industries. Working conditions often seem overly “comfortable” from an Indian perspective. So, as an investor, you should only plan to save on this area very carefully. 
  

What aspects should Indian companies take into account when negotiating with German medium-sized businesses?

Even if the company is owned by a few family shareholders, it usually has a very qualified management team whose members do not belong to the family but enjoy its complete trust. If they are involved in negotiations, this is not a sign of low esteem but a sign of the company's special professionalism.
  
Middle managers will also take part in negotiations because they make an important contribution professionally. They also speak directly. Indian businesspeople should be prepared that individual topics will be directly discussed by these employees during negotiations with an Indian partner.
  
German partners are very open and direct. They strive to get the important issues on the table quickly. This should not be misunderstood as being dismissive but rather that they respect the negotiating partner and their interest in reaching an agreement quickly. 
  
Building personal trust with the business partner in all transactions is not expected. For the German partner technical and commercial aspects are important issues to be discussed as early as possible and then agreed on in a binding manner. Negotiations will be strained or broken off if essential conflict issues are brought up only at the end of the talks.
  
It is unusual to be introduced to the family or to be invited to the home of your business partner. In negotiations, a distinction is usually made between the “business” component during the day and the “social” component in the evening. Besides, it is not appreciated if topics agreed upon during the day are brought up again in the evening.
  
Important: It is not common in Germany to factor in much elbow room for making concessions during negotiations, especially with regard to the purchase price. From the point of view of the German partner, proposals are usually calculated “fairly” right from the beginning and are therefore “almost final”. 

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Martin Wörlein

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