Mergermarket data shows that the German-speaking region ended the first half of 2020 in terms of M&A better off than the rest of the continent.
M&A deal value dropped 12.2% compared to this time last year – a smaller drop than the 29% decrease seen across Europe in the same period. Here are the reasons why DACH M&A weathered the coronavirus pandemic better than their European neighbours:
Robust government crisis response
Even though several sale processes dwindled; robust crisis response from governments and an early return to business have provided adequate confidence for cutting deals. However, a return to normality will not be immediate and dealmakers remain cautious.
Brisk activity pre-pandemic
The DACH region saw brisk activity in this year’s pre-pandemic months and dealmakers were able to make the most of the last weeks of a decade-long bull market for deals. The region also benefited from a resilient mid-cap private equity industry that helped keep the M&A flame alive during the lockdown period.
Soaring pre-pandemic values
A record number of 19 deals valued above €500m were announced in the region during 1Q20 boosted by megadeals including Thyssenkrupp’s sale of its elevator unit to Advent, Cinven and RAG foundation for €17.2bn in February, and the acquisition of Deutsche Glasfaser by EQT and OMERS for €2.8bn in the same month.
Mid-cap buyout resilience
Second quarter numbers, which saw value drop to a historic low as lockdowns were enforced, were ultimately made more palatable by deal activity generated by DACH mid-cap buyout groups, which have proven to be more resilient than European counterparts during this crisis.
The DACH region recorded a total of 36 sponsor-led acquisitions taking an 18.1% share of European buyout activity in 2Q20.
Throughout the pandemic, companies in the DACH region have remained attractive targets for foreign investors, accounting for 20% of inbound activity in Europe by volume in 1H20.
Japanese buyers in particular accounted for 12 deals in 1H, on par with 13 deals in 2H19 despite the COVID-19 slowdown. Notable transactions here include Hitachi Automotive Systems acquisition of seneos, an automotive device software developer, as well as Nihon Spindle Manufacturing’s purchase of machine maker Leifeld Metal Spinning.
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Emma-Victoria reports on M&A activity in the DACH region for Mergermarket. Previously she has worked for Bloomberg in Frankfurt, The Daily Telegraph in London, Deutsche Presse Agentur (dpa) in Berlin, and Falter Verlag in Vienna. She has a Masters in German Literature from Oxford University.