The premature end of the government, new elections, and huge assets in Germany. An American president who announces, implements, or cancels disruptive measures at a dizzying pace. Uncertain times in which Europe must quickly take more responsibility for its defense. These developments are currently fueling the markets.

So, how will rapid, sometimes unpredictable changes like these affect M&A activity in Germany? Rick van Aerssen (Freshfields), Dr. Michael Drill (Lincoln International), Nicolo von Freyberg (bluu unit), David Döbele (pumpkincareers), and Markus Schiller (Datasite) shared their views with financial journalist Patrick Dewayne at Datasite’s recent Dealmakers Dialogues event in Frankfurt.

M&A in Germany: The current state

Anonymised data from Datasite’s platform on M&A activity in DACH reveals that:

• 15% more deals came to market in DACH in 2024 – outperforming both the global and EMEA averages (both 12%).
• The average diligence time for transactions is getting shorter: at 169 days, it was 4% less in DACH in 2024 than in 2023; however, preparation time (prior to deal kick-offs) has become significantly longer.
• Just under half of transactions in 2024 successfully completed, which is in line with the expected rate of closure.

Opportunities and risks

Even in the face of a rather uncertain environment, there appears to be plenty of opportunity for M&A activity in 2025 in Germany. While TMT has been a stalwart of activity, it slipped to second place in terms of the volume of deals in 2024 and is still expected to be a major source of opportunities in 2025 (Deal Drivers: EMEA FY 2024). The new frontrunner is the industrial and chemical sector, which also includes the automotive industry and its suppliers - a sector that is currently seeing a lot of movement. The consumer goods sector is in third place.

The defense sector currently brings up the rear. However, with the recent increase in defense efforts in Germany and the consolidation of defense strategies in Europe, more M&A activity in this sector is expected going forward.

PE firms are under pressure to sell after a backlog of deals in recent years, and they also have plenty of capital to invest. There are also enough targets that are not suitable for strategic buyers because the strategic fit is lacking. However, interested parties must be prepared to make an upfront investment, show the courage to take risks, and submit a binding offer without demanding exclusivity or that costs be covered.

Family businesses are also presenting opportunities for investors, as many owners want to ensure that their company remains competitive in the long term under the umbrella of a strong group. Moreover, succession issues persist due to regulatory issues So, there is currently a wave of consolidation in the German SME sector and in the skilled trades and potential for medium-sized and small deals. However, identifying the most promising candidates requires a relatively long diligence period and building trust, especially with the family business owner, who must be prepared to take the step from owner to employed managing director.

One of the risks is the uncertainty of the stock markets, which makes access to capital more difficult. Planned IPOs are often cancelled, postponed or scaled back due to market volatility. Regulation can also have a negative impact on M&A activity.

In addition, the average holding period in the private capital sector has increased, and there is often a second and third refinancing. And PE firms expect repayment before they invest again. 

Nevertheless, activity is expected to pick up in 2025 for DACH. There are more transaction kickoffs, more users in the data rooms, and more potential buyers than in previous years. In addition, the share prices of the most important M&A investment banks have doubled. This means that despite the current difficult environment, the stock market expects more M&A market activity in the coming years. 

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