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Top Trends in 2016 German Mergers and Acquisitions

9 years after the financial crisis of 2008-9, patience is growing continuously thin on the market’s recovery.  While there have been several large increases in German M&A activity in recent years, the levels experienced pre-crisis have yet to be seen.  Fortunately for those waiting for this recovery, the 2016 trend report from Mergermarket offers several promising trends.  

These trends, ranging from value and deal increases to boosted involvement from rising foreign powers to the record-breaking Bayer-Monsanto deal, offer many signs pointing towards increased M&A activity and value concerning German business.

Deal Value and Volume up

The first noteworthy trend was an increase in value-per-deal amongst domestic German dealmaking.  From 2015-2016, deal value has increased by €15.4 billion while deals have only gone up by 47.  On percent basis that is a 27.2% increase in value and a 5.7% increase in deals (2015: €56.8bn on 819 deals, 2016: €72.2bn on 866 deals).   This large increase in value per deal suggests that while German companies are making more deals within its market, it is more apparent that they are making higher value deals than previously seen.   Conversely, foreign dealmaking increased 18% over 2015, but value-per-deal has gone down.   So while more deals were made, and for a higher total value, these deals were worth less on average than in 2015.   

Chinese  investment soars

China has increased its M&A value in Germany by 32x, or 3200%.   This rapid increase is even more noteworthy considering the fact that the U.S.’s deals, representing the largest foreign involvement in German business, went down by 9.9%.   On a percentage basis this would show that Chinese involvement in Germany is rapidly gaining on American involvement, but the Chinese still have far to go. 

Legal  restrictions to stem deal flow?

Not only do American deal values almost double that of the Chinese (€15.4bn versus €8.8bn), but in November, the Chinese government began attempting to restrict Chinese investments in Germany.  Pair this with similar attempts from German policymakers to stymie Chinese investments as well, and it seems very unlikely that this level of growth from Chinese dealmaking will be reached again, or at least in the near future.

Record  breaking numbers

Finally, the report notes several record-breaking numbers since Mergermarket began reporting on German M&A, but there are several statistics which represents values that haven’t been seen since 2007.   With so many of these highs being reported from 2007, and with 2016’s values coming so close, and in some cases exceeding them, it stands to reason that a recovery from the 2008 financial crisis could be on the horizon, at least as far as M&A is concerned.  These highs were seen in several parts of German business, including private equity buyouts, outbound M&A activity, growth in the Industrial and Chemicals sector (targeted by many of the aforementioned Chinese investments), as well as domestic dealmaking values.

It is worth noting that many of these statistics could be inflated by the Bayer buyout of Monsanto, representing the largest German buyout on record as well as the second largest deal of the year globally.  This deal, valuing €56.5bn, also had a large effect on the financial advisors and legal advisor tables for German M&A.  Nonetheless, many of these trends represent excellent growth and suggest a very healthy German merger and acquisition environment.  Many of these trends will likely be discussed in further detail at the 2017 Mergermarket Germany Forum in March.

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