The political and economic turmoil of recent months has left its mark. The early dissolution of the federal government, the new elections, international tensions, particularly surrounding US foreign and trade policy, and the pressing security policy issues in Europe are unsettling investors and companies alike.

But while the news situation is increasingly dense, the M&A market in Germany is showing surprisingly positive signals. Current data from Datasite shows: Transaction activity in the DACH region is on the rise, albeit with new demands on participants and processes.

Deal Flow is Picking up Speed – but under New Signs

In 2024, around 15% more deals came onto the market than in the previous year – significantly more than the global (12%) or EMEA-wide average. Even if transactions are completed faster (on average in 169 days), the preparation phase before the deal start is noticeably longer.

This means that transactions are taking place again, but they have become significantly more demanding. Buyers and sellers are investing more time in preparation, due diligence is becoming more precise, and managing expectations is more important than ever. The quality of transactions is increasing, quantity alone is no longer enough.

Industry Instead of Tech: Sector Shift Brings New Dynamics

A striking trend: The focus in M&A activity is shifting. The tech industry (TMT), long the dominant growth driver, slipped to second place in 2024.

The top spot is now occupied by the industrial and chemical sector, including automotive suppliers, an area that is currently in a state of flux. The consumer goods sector also remains relevant, while transactions in the defense sector are only expected in the medium term after the start of new European consolidation efforts.

Private Equity in a Bind: Capital Pressure Meets Deal Backlog

Private equity firms face several challenges. On the one hand, they have enormous capital reserves, the so-called “Dry Powder”, on the other hand, a significant transaction backlog has built up over the last few years.

Many portfolio companies are waiting for an exit, but the market environment demands different rules. Strategic buyers are increasingly lacking, and investors are required to make bold decisions, often without exclusivity, with high upfront investment and fast closings. At the same time, the pressure is growing, as funds can only reinvest if returns have been made beforehand.

Focus on SMEs – Consolidation through Succession and Structural Change

It is particularly interesting that German SMEs are increasingly coming into focus, not least due to upcoming succession arrangements. Many entrepreneurial families want to ensure that their company remains competitive in the long term, be it through sale, merger or strategic partner. In addition, there are challenges in regulated industries and in the skilled trades, where a wave of consolidation is emerging.

However, SME deals are different. Personal trust, patience in the process and a good understanding of family structures are crucial. The due diligence phase is often longer, the process of selling emotional. But the potential is high, especially for investors with a sense of tact.

Outlook: Complex Market – but Clear Signals

Despite political uncertainties and capital market fluctuations, there are clear indications of a lively M&A landscape:

  • More transaction starts
  • More users in virtual data rooms
  • Significantly increasing valuation of the major M consultancies on the stock exchange

The expectation on the capital market is clear: The M&A year 2025 will be more active, but more selective, data-driven and more intensive in terms of advice.

For companies, this means: Good preparation, clear communication and professional support are more crucial than ever.


Stark
Partners
 – your Partner for M&A in SMEs

Whether as part of a strategic realignment, a
succession solution
, or in a distressed context:


stark
partners
supports you through complex M&A processes with well-founded expertise and a clear, structured approach.

Our offer includes:

With our interdisciplinary team and broad network, we are able to implement even sensitive transactions discreetly and successfully.

Sources:
[1] PWC

 

 

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