Liquid Assets

Lacking Affordable Takeovers, Fearing Buyer's Remorse, German Companies Hoard Cash

Bank of Spain Governor Miguel Angel Fernandez Ordonez worries about the stress test.
Bank of Spain Governor Miguel Angel Fernandez Ordonez discussing Spain's stress test of its banks on July 14, 2014, at a press conference in Madrid.
  • Why it matters

    Why it matters

    The estimated €1 trillion in undeployed capital held as cash by German companies could be ploughed back into the economy through investment, hiring or research and development.

  • Facts


    • The 30 companies in Germany’s DAX Index had about €1 trillion in uncommitted cash on hand at the end of 2013.
    • Many German companies are hoarding cash because they can’t find affordable companies to buy or fear making the wrong purchase.
    • U.S. companies also had more than $1 trillion in cash reserves at the end of last year, according to Moody’s.
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Engineering and electronics conglomerate Siemens has been mocked for decades as being just a bank with an affiliated electrical goods department.

With its tens of billions of euros in cash reserves, the Munich company used to be an exception.

Today, many corporations are acting like savings and loan banks. There have never been so many liquid assets on balances sheets. Companies in the DAX stock market index hoarded almost €1 trillion ($1.3 trillion) at the end of 2013. The cushion is likely even greater now.

The reserves of German companies pale in comparison with the cash holdings of American companies. Apple alone has more fluid assets then the 10 largest German corporations together. The reserves of all U.S. corporations at the end of 2013 was more than $1 trillion, as calculated by the credit rating agency Moody’s. And the money stockpiles are growing there as well.

Many corporations ... are sitting on cash so they have the resources to buy competitors. However, the price of reputable companies is high, and no one wants to take on the risk of acquiring ailing corporations.

This development has several causes. Companies are being cautious in the aftermath of the financial crisis of 2008-09. The corporations have little confidence in actual banks, so the companies are striving for financial independence.

Also, investments and takeovers are proving more difficult to attain than before. Many corporations, such as Germany’s consumer products maker Henkel for example, are sitting on cash so they have the resources to buy competitors. However, the price of reputable companies is high, and no one wants to take on the risk of acquiring ailing corporations.

U.S. giants in the Internet and high-tech industry face another problem. Companies such as Google, Microsoft and Apple have difficulty finding suitable takeover targets that fit their core businesses. The titans buy smaller companies time and again, but the deal-to-end-all-deals has escaped Google & Co.

The German companies, as well, can’t find suitable candidates for takeovers because the big companies already dominate their core markets and could face antitrust obstacles.


Picture Source: DPA
German companies, like their larger U.S. counterparts, have accumulated cash since the financial crisis as they have failed to find suitable takeover targets. Source: Deutsche Bundesbank


Overall, the hoarding of cash isn’t healthy. Companies are business undertakings and they should undertake something and not behave like investment funds. Other entities are better at investing money than industrial concerns, even if many of the companies’ chief financial officers style themselves as better bankers.

If the corporations don’t find sensible uses for their money pile, eventually they should give it back to owners, namely to the stockholders. The reserves of the DAX’s 30 companies exceed their dividends threefold.

That is decidedly too high.


Bernd Ziesemer is a commentator on current affairs and former editor-in-chief of the Handelsblatt. He can be reached at:


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