After a surge in M&A activity in 2020 and 2021, fuelled by pandemic-driven market dynamics, transaction volumes and values for private investors in Germany saw a decline in 2022, with a flat trajectory in the following years. This downturn was primarily due to rising interest rates, limited capital availability, and challenging geopolitical and macroeconomic conditions. However, in the last quarter of 2023, private equity deal values began to show signs of growth, although the recovery was uneven, with some softness persisting into the third quarter of 2024.

Despite lingering uncertainties, this early uptick sets the stage for stronger growth and renewed momentum in 2025. The recovery of M&A activity involving private capital is expected to accelerate, fuelled by lower capital costs, an increasing pool of deployable private capital, a growing backlog of portfolio exits, and a revival of the IPO market.

• Value Creation: One of the dominant trends for 2025 will be a heightened focus on value creation, as private equity firms face increasing pressure to divest portfolio companies that have been held for extended periods. With exit multiples still below their peak, enhancing value in portfolios will be a key strategy for achieving attractive returns.

• Sector Convergence: Investments by private capital will continue to span multiple industries, driven by the convergence of sectors such as infrastructure, energy, and technology. AI advancements will play a pivotal role in enabling these cross-sector transactions, facilitating new opportunities and efficiencies.

• Continued Consolidation: Larger market players are set to expand their offerings, particularly in areas such as infrastructure and private debt. Meanwhile, mid-sized funds may face increasing challenges in raising new capital and could need to carve out specialized niches in order to thrive in this evolving market landscape.