Outline of the structure of the MBG, its objectives, investment programs and business policy

History

In 1970 the German Federal Government initiated an instrument for subsidizing equity capital financing through private investment companies. The funds to be invested are raised mainly by the "Kreditanstalt für Wiederaufbau" (a federal and state owned bank). To facilitate this project "Mittelständische Beteiligungsgesellschaften" (MBGs) were founded in several states of the FRG. The "MBG Baden-Württemberg" was one of the first to come into operation in 1971. The development and business activities of the various MBGs show considerable regional differences. In 2007 the MBG in Baden-Württemberg alone account for more than 21,0% total amount invested by all the MBGs in Germany. The " MBG Mittelständische Beteiligungsgesellschaft Baden-Württemberg GmbH" is the largest MBG in Germany.

Objectives

The MBG is an organization for self-help within our economy. It participates as a non-profit-investment-company in small- and medium-sized companies in the state of Baden-Württemberg. Aim and objective is to compensate for the disadvantages suffered by small- and medium-sized companies in the present functions of the capital markets. It cooperates with the Bürgschaftsbank which extends a guarantee for 70 % of the amount which the MBG invests in client firms.

Programs

At present there are various different "programs" under which the MBG can invest. Almost all such investments are refinanced by loans from banks which are owned by the federal government and / or the state government. The funds are available for new enterprises as well as for already existing companies. Projects to be financed by means of investments of the MBG are for example machinery and equipment, real estate - usually for business purposes - but also some programs include costs for the development of new products or services as well as its introduction in new markets.

The maximum investment amount is 1,0 million €.

"Venture Capital"

The MBG cooperates intensively with other government, semi-government or private organizations supporting new and existing companies with projects of a highly innovative nature. "Venture-capital"-financing has become very important for the MBG within the last years.

Business policy

The MBG participates only as a silent partner. It does not intervene in the day-to-day management of its firms. In cooperation with the chambers of commerce, crafts and different associations, the MBG consults its partner firms in financial affairs devoting special attention to new entrepreneurs without any charge. Collateral is not asked for thereby remaining available for bank-loans. The entrepreneur himself, however, has to give a guarantee to the MBG (Exceptions are possible). The investment of the MBG usually has to be repaid after ten years at nominal value. The MBG does not demand participation in the companies' good-will or hidden reserves.

There is no competition between the MBG and the client's bank. The purpose of the MBG is to provide equity capital - very often in addition to short and medium terms loans granted by the company's bank.