German dealmaking posted steady growth in 2024 against a backdrop of political and economic upheaval
Deals targeting German assets remained resilient in 2024 despite the challenging political and economic climate in the country. The German economy, traditionally the engine of the wider EU bloc, has faltered in recent years due to stubbornly high inflation, a worsening trade outlook, geopolitical uncertainty and declining consumer confidence.
And the economic situation continues to appear precarious. National GDP contracted 0.2 percent in 2024, making it the weakest performer across the wider EU bloc. The German central bank recently slashed its 2025 growth predictions to 0.2 percent, down from 1.1 percent in June.
The country’s political climate had further exacerbated economic concerns, with a lame-duck government unable to push through impactful reforms and an election bringing even more uncertainty. The hope is that, after the success of the Christian Democratic Union (CDU) in the recent federal election, the country will be on firmer political ground.
M&A activity by value 2019 – 2024
Target location: Germany Bidder location: Global Sectors: All Sectors
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Effective July 1, 2023, the underlying Mergermarket data supporting the M&A Explorer was consolidated with Dealogic data to produce an even more complete picture of the M&A marketplace. M&A Explorer commentary published before July 1, 2023 may reference data that does not reflect this consolidation.
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However, US President Donald Trump’s re-election could also destabilize the German economy, with his protectionist agenda and position on tariffs a worry for Germany’s export-driven economy. According to the Bundesbank, Germany’s economy would “suffer considerably” if the US administration follows through with its proposed tariff increases.
Data and deals
Despite the uncertain political and economic backdrop, Germany’s dealmaking activity has remained resilient thus far. A total of US$101.8 billion was spent across 1,773 deals in 2024—a seven percent uplift in value year on year and a two percent increase in volume.
The largest deal of the year saw UAE-owned ADNOC pursue its largest-ever foreign takeover through a US$16.4 billion offer for chemicals group Covestro. The deal comes as the oil producer looks to diversify its business away from oil and expand its presence in the plastics industry. It represents the Middle East's second-biggest acquisition on record as Europe’s relatively low valuations attract investor interest.
Danish logistics group DSV’s US$15.8 billion takeover offer for Deutsche Bahn’s logistics unit DB Schenker marks the second-largest deal of the year. The all-cash acquisition will add air, sea and road freight to DSV’s offering, on top of its warehousing and logistics services. DSV reportedly beat off competition from PE firm CVC and rival shipping group Maersk to secure the deal.
US PE group TPG’s proposed US$7.5 billion buyout of metering company Techem marks the third-largest deal of 2024. The transaction highlights not only Germany’s attractiveness to international buyers but also a renewed interest from PE groups under pressure to distribute cash. Techem, which offers consumers data on their energy and water usage, is seen as part of a growing industry due to the global shift to clean energy and sustainable power usage.
Inbound M&A activity into Germany has steadily increased in recent years, despite Germany’s economic woes. A total of US$60.8 billion of deals announced in 2024 marks an 8 percent increase from the year before. Deal volume similarly registered a 12 percent uplift over the same period.
Trends and opportunities
A rise in distressed assets, particularly in the hard-hit manufacturing sector, looks set to drive M&A activity in 2025. Bankruptcies in the country are at their highest since the financial crisis, presenting plenty of opportunities for buyers seeking assets at bargain prices.
Germany’s automotive market is under pressure, particularly due to competition from EV producers in China. Widespread digital transformation in the sector will likely result in a wealth of distressed assets coming to market as businesses focus on shedding non-core assets to fund transformation. Interest from China looks set to be another driver of automotive dealmaking as bidders use M&A to sidestep EU tariffs on EVs.
The new US administration looks poised to impact cross-border dealmaking across the globe, with Germany being no exception. Dealmakers are predicting a potential uplift in cross-border M&A activity between Europe and the US in 2025 as Trump’s protectionist agenda drives European manufacturers to gain a foothold in the US manufacturing sector. A strong US dollar could also result in an increase in inbound M&A from the US as the valuation gap widens.
Challenges on the horizon
The ongoing issue of pricing discrepancy between buyers and sellers poses a challenge to Germany’s M&A market moving forward. While PE firms are under pressure to distribute cash following a period of low activity, many are still held back due to a lack of agreement on valuations. In some cases, this has led to an increase in buyers demanding concessions and the use of deferred and contingent purchase price elements.
Germany has also been living through a period of significant political uncertainty. The decision by Chancellor Olaf Scholz to unexpectedly dismiss his finance minister last November effectively put an end to the three-way governing coalition and triggered a snap election. However, it is hoped that the recent CDU victory will strike a more reassuring note for dealmakers, after a period of political upheaval that dulled investor appetite as businesses waited for the outcome of the election.
A flagging startup economy is also holding back innovation, prompting international investors to look elsewhere for growth. Germany ranked ninth as a global innovation hub in the Global Innovation Index 2024, behind Switzerland, the US, the UK and Sweden. There has been a growing and concerning trend of innovative companies across Europe—for example, in the green tech sector—moving to the US and Asia due to burdensome regulation and a lack of funding.
Outlook
While dealmaking has been steady, the future—both for 2025 and beyond—appears somewhat mixed for German M&A. The volume of distressed assets coming to market will be ripe for the picking and could prompt PE investors to part with their cash—something they are under pressure to do. Digital transformation will create more dealmaking opportunities as market players look to shed non-core assets and keep pace with China.
Cross-border M&A from the US could also be on the rise, with a strong dollar making German assets more attractive. The US administration’s protectionist agenda may even push European manufacturers to acquire US peers in order to gain a foothold in the market.
Despite the CDU victory, Germany’s faltering economy and uncertain political backdrop will still be of concern to dealmakers, with many waiting on the outcome of coalition talks and a clearer direction of travel, politically.
Even post-election, it is difficult to predict when economic stability and political certainty will return to the country. Dealmakers may hold off until the dust settles before making their move.
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