THE TREUHANDANSTALT AND VENTURE CAPITAL I N THE NEW LANDER

In order to revitalize its privatization programme, and to encourage t he creation of a network of SME/SMI in the new Lander, the Treuhandans talt adopted an international privatization formula which had, up till then, been little recognized in Germany, the Management-Buy-Out. Howe ver, this arrangement which a priori offered undeniable advantages, di d not alleviate the shortage of funds afflicting former State enterpri ses making the transition to a market economy. The financial instabili ty of these enterprises privatized by MBO was such as to mortgage the success of the recovery, and thus, in due course, of the privatization programme. In an attempt to avoid this pitfall, the Treuhandanstalt, as from 1991, decided to incorporate venture capital in its original p rogramme. Now that the phase of privatization, strictly speaking, is d rawing to a close, the first balance sheet to be drawn up for this exe rcise turns out to be rather disappointing : the investment of venture capital in the new Lander up till now has shown itself rather meagre. Examination of the half-tone results so far obtained certainly leads one to question the relevance of this privatization technique during t he transitional phase. Mainly, it enables one to highlight certain rec urrent factors which are specific to the German market, and which expl ain the low level of investment made by the venture capital companies : the dominance of the banking sector in the raising of funds, the pow erful competition for investment from the old Lander, as well as obsta cles of a juridical and cultural nature.