Why Czech companies are buying up Germany's struggling firms

As Germany navigates its longest economic slowdown since World War II, a notable reversal of fortune is unfolding: Czech entrepreneurs are stepping in to acquire struggling German companies, upending the traditional economic hierarchy in Central Europe.

New data shows the speed of this shift. According to Reuters, Czech company investment into German businesses jumped nearly 30 percent in 2023, reaching almost EUR 5 billion (CZK 121 billion).

Data from the Czech National Bank shows that Czech investments in Germany are doing well. The number of employees in companies controlled from the Czech Republic almost doubled between 2018 and 2023, Czech Television reports.

Czech investors see a massive, long-term opportunity. Many entrepreneurs believe there’s a crucial “three to five-year window of opportunity” to acquire struggling medium-sized firms right across the western border.

Why the sudden availability? Germany’s economy has contracted for two consecutive years, and the cornerstone of its national success, the renowned ecosystem of small- and medium-sized businesses known as the Mittelstand, is under severe stress. Bankruptcies are up 9 percent, and roughly 231,000 Mittelstand businesses have been forced to close.

Marc Tenbieg, President of the German Mittelstand association, told Reuters that the economic weakness is compounded by "many unresolved company successions." This crisis of aging ownership is creating a perfect entry point for ambitious Czech groups.

As Adam Jareš, director of CzechTrade Germany - Düsseldorf, confirms: "Some Czech companies are taking advantage of the fact Germany is not doing so well, and they see it as an opportunity to buy a German company on good terms."

CzechTrade notes that many domestic firms want to expand to Germany in the long term, either by establishing new branches or buying local businesses.

Czech firms are making bold moves, backed by capital and aggressive growth strategies. The arms holding Czechoslovak Group is expanding, having bought a nitrocellulose production plant in the spring.

The best example of acquisition success comes from brandy giant Rudolf Jelínek. After taking a majority stake in the Berlin brand BLN, the deal immediately unlocked the German supermarket landscape. Petr Minárech, CEO of R. Jelinek Deutschland GmbH, revealed the impact: “When we started working together, Jelínek was in about three or four stores. Now there are hundreds.”

This strategic partnership is proving mutually beneficial. While Germany is a key market for Jelínek, BLN has also penetrated the Czech, Slovak, and even Japanese markets, thanks to the merger. The company aims to more than double its annual turnover of half a million euros and increase sales to 50,000 bottles within a year.

BLN itself, thanks to the merger, has penetrated the Czech, Slovak, and Japanese markets. They aim to more than double their annual turnover of half a million euros and increase sales to 50,000 bottles within a year.

However, this rush to buy comes with significant caveats. Despite the increased interest and acquisitions, success isn't guaranteed, and the strong link between the two economies still poses a major risk.

Achim Hartig from the German Trade and Investment Promotion Agency offers a balanced view, noting that German companies possess "hundreds of years of experience" and "can decide which parts to sell and where added value should remain in the country."

More importantly, the Czech Republic’s economy is still heavily dependent on Germany, sending roughly one-third of its total exports there. Any prolonged German slump will inevitably drag Czechia down.

This was starkly clear when major German manufacturers, like Volkswagen, decided to limit some domestic operations in 2024. As Petr Musil of the Czech National Budget Council famously said: “When Germany sneezes, the Czech economy gets the flu.”