More deals expected: German M&A market expects a return to success in 2025

Results of the "M&A Outlook 2025" by KPMG in Germany

Results of the "M&A Outlook 2025" by KPMG in Germany

  • German companies and private equity firms plan more deals in 2025
  • Transformations accelerate deal activities, deal structures become more flexible
  • More focus on sustainable growth and value creation, also in private equity

Berlin, 6th December 2024

After difficult years, a trend reversal is emerging in the German market for mergers and acquisitions (M&A): 65 per cent of companies initiated and completed more deals in 2024 than in the previous year, while the figure for private equity (PE) investment firms was 44 per cent. This is shown by the "M&A Outlook 2025", for which KPMG surveyed almost 200 top decision-makers from companies and private equity firms in Germany. More than half of these companies have an annual turnover of at least 500 million euros or manage funds of over one billion euros.

Although a volatile interest rate environment, economic uncertainties and geopolitical tensions have not disappeared, the bottom seems to have been reached with regard to the coming year: 85 per cent of companies expect the M&A market to be significantly more dynamic in 2025, and almost all private equity firms (91 per cent) also expect more transactions. Expressed in concrete figures, 76 per cent of companies and 84 per cent of PE firms want to complete at least one transaction or more in the coming year. A good third (30 per cent) of the companies expect a deal volume of between 500 million and one billion euros.

Transformation pressure fuelling transaction activity

   

The study shows: Two out of three companies (69 per cent) are planning to enter into a joint venture or strategic alliance in the next year, partly in order to share resources and risks between the partners.

When asked about their primary transaction objectives, 87 percent of companies and 75 percent of private equity investments prioritise setting a sustainable course over quick course corrections: above all, they want to strategically secure the growth and value of their organisations in the long term. More than half of the companies (57 per cent) and PE firms (53 per cent) also see opportunities to penetrate new market segments and customer groups.

Interest rate level has little influence on deal intentions

Despite the foreseeable brightening of the M&A market, the overall economic situation remains a challenge for those surveyed. In addition to overly high seller expectations in terms of company valuation, 61 per cent of companies and 59 per cent of PE investments see the general uncertainty on the market as a major hurdle in the initiation of deals. However, only around a third cite difficult financing conditions as an obstacle.

Company valuation also plays an overriding role in concrete negotiations. 41 per cent of companies (PE: 44 per cent) find it difficult to reach an agreement with the contractual partner on the valuation; 44 per cent of companies (PE: 47 per cent) are feeling increasing pressure to renegotiate previously agreed contractual terms or company values due to the current economic situation.

A change in interest rates would have surprisingly little impact. In the event of a hypothetical fall in interest rates of 0.5 per cent, only 19 per cent of companies and 22 per cent of private equity firms would become more active on the transaction market. 81 per cent of respondents also see a constant low interest rate level as a prerequisite for a return to the transaction volume of previous peak times.

Press contact

Clemens Reisbeck

Deputy Head Corporate Communications
KPMG AG Wirtschaftsprüfungsgesellschaft

T +49 89 9282 1722
creisbeck@kpmg.com