New German M&A Report: Decrease in deals but higher values, especially with the US
A recent analysis of M&A trends among German DAX and MDAX companies from 2015 to 2024 conducted by Freshfields, a global law firm, revealed a shift in the M&A landscape. While the number of deals decreased, the total deal values soared to greater heights, especially in transactions involving the US market.
In 2024, both the DAX and MDAX companies experienced a decline in the number of acquisitions and investments compared to the previous year. The 40 DAX companies saw a 14% drop in deal numbers, moving from 218 deals in 2023 to 187 in 2024. Similarly, the 50 MDAX companies recorded a 21% decrease, falling from 68 deals in 2023 to 54 in 2024. Despite the decrease in the number of deals, the total value of transactions portrayed a significant contrast between the DAX and MDAX companies. MDAX investments dropped by 42%, from $5.3bn in 2023 to $3bn in 2024, while the DAX constituents witnessed a remarkable surge of 118%, reaching $39.9bn in 2024 from $18.3bn in 2023. This surge was mainly attributed to several billion-dollar deals and a strong inclination towards investments in the US market.
Lars Meyer, M&A partner at Freshfields, suggested that the subdued M&A activity in 2024 could be linked to various factors such as high-interest rates, constrained credit markets, and geopolitical uncertainties. Additionally, a misalignment in price expectations between buyers and sellers further delayed sale processes until 2025. Despite the challenges, DAX companies exhibited a notable interest in investing in the US market, with investments escalating from $2bn in 2023 to nearly $30bn in 2024. In contrast, European investments outside Germany saw a decline, showcasing a strategic shift towards the US market by DAX companies.
The regulatory complexities surrounding cross-border transactions have indeed posed challenges for companies, making them time-consuming and uncertain. However, this environment has driven companies to reinforce domestic and near-shore operations, emphasizing the importance of regulatory risk management in successful M&A endeavors. The trend towards protectionism, reflective of global trade policies, continued in 2024, impacting cross-border transactions significantly.
Looking ahead, the study by Freshfields anticipates a potential rebound in M&A activity among DAX and MDAX companies in 2025. Improved borrowing conditions, strategic imperatives prompting core business focus, and macroeconomic trends like AI advancement and global trade realignments are expected to stimulate further M&A transactions. The demand for M&A targets is likely to be met by increased exit and buyout activities among private capital investors in 2025.
Overall, the M&A landscape in Germany is undergoing a transformation, not deindustrialization. The focus on core businesses and strategic realignments will continue to drive M&A activities in 2025, setting the stage for significant deal-making and transformative transactions in the coming year.