(Bloomberg) -- A flurry of big-ticket German acquisitions over the past few weeks has taken deal volumes to nearly $100 billion, outpacing gains in the rest of Europe and giving bankers hope of a resurgence for the remainder of the year.
On Tuesday, state-owned Adnoc announced it’s buying chemical producer Covestro AG for €11.7 billion ($13 billion) in the largest-ever Middle Eastern acquisition in Germany, while buyout firm TPG Inc. clinched a €6.7 billion deal for metering company Techem. The transactions came just a couple of weeks after Danish transport group DSV A/S agreed to buy Deutsche Bahn AG’s logistics arm for €14.3 billion.
The volume of takeovers in Germany has now soared 90% this year to $96 billion, the highest level in three years, according to data compiled by Bloomberg. That’s more than double the 42% rise in broader European deals in 2024.
The uptick in mergers and acquisitions contrasts with the gloomy mood in many German boardrooms, with troubles at top automakers threatening one of the country’s most important industries. The rest of the year promises plenty more deal activity, especially after UniCredit SpA Chief Executive Officer Andrea Orcel surprised the Berlin establishment with talk of a bid for Commerzbank AG.
“M&A activity in Germany has picked up markedly in recent months, outpacing other regions,” said Lukas Poensgen, head of M&A in German-speaking countries at Bank of America Corp. “The trough of the M&A market in Germany is behind us and expect activity to continue rising.”
A number of deals have been spurred by the pressure on German companies to simplify their corporate structures as they grapple with soaring energy costs and intensifying competition from China. Bloomberg News reported this week that officials in Berlin are set to lower their forecasts and are now expecting no economic expansion this year.
Last week, chemical maker BASF SE said it would prepare a listing of its agricultural arm, sell a Brazilian paint business and find partners for its battery unit. Continental AG unveiled plans in August for a potential breakup that could separate its struggling car-parts business from its more lucrative tire operations. DHL Group has also announced it’s carving out its domestic delivery business and e-commerce operations as standalone entities.
Open to Change
“Large corporates are showing increasing activity and also feel the need to act, which will continue to accelerate,” said Tibor Kossa, Goldman Sachs Group Inc.’s co-head of investment banking for Germany.
While a few mega transactions are boosting the deal volumes, there’s hope that the bread and butter business could come back as well, according to Carsten Berrar, managing partner of Sullivan & Cromwell’s Frankfurt office.
“The number of deal related conversations with executives has soared after the summer break,” Berrar said.
In July, Robert Bosch GmbH agreed to buy Johnson Controls International Plc’s heating and ventilation assets for $8 billion, diversifying away from the automotive market with its biggest-ever acquisition. Financial investors have also been active, with KKR & Co. snapping up renewable developer Encavis AG and TPG buying Aareal Bank AG’s software arm.
KKR’s European private equity co-head Philipp Freise said Germany represents a “very attractive opportunity.” The power of innovation in family-owned German companies is unparalleled, and many of them have built up global niches, he said.
“People wouldn’t invest in Germany if there wasn’t opportunity,” he said in a Bloomberg Television interview on Tuesday. “It still has all the advantages, but it’s much more open to change now. It wants entrepreneurial capital.”
More deals are coming to a head, with buyout firm GTCR working to finalize a potential acquisition of generic drugmaker Stada Arzneimittel AG, people with knowledge of the matter have said.
Companies have become more open to restructuring which is helping to drive deals, according to Sven Baumann, head of investment banking in German-speaking countries at Jefferies Financial Group Inc.
“Financial sponsor activity is clearly rebounding,” Baumann said. “The German Mittelstand has woken up to the challenges and opportunities in a changing global environment.”
(Updates with background on German economy from fourth paragraph.)
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