In 2024, the Technology, Media and Telecom (TMT) sector was the most active sector in the German Mergers and Acquisitions (M&A) market once again, with 569 transactions, followed by Industrial Manufacturing with 446 and Consumer Markets with 261. The share of M&A in the TMT sector involving private equity (PE) investors is continuing to increase, another continuation of recent trends: in the second half of 2024, more than three quarters of TMT acquisitions were made by PEs. The total number of TMT transactions compared to the previous year (2023) fell significantly for the first time in recent years, from 693 to 569. However, this is still well above the level of the pre-pandemic years: in 2019, there were only 363 transactions. For 2025, we expect activity to remain stable or increase, in view of the rapidly falling interest rates, the growing impact of AI investment in the deals market, the persistent high pressure on PE divestment pipelines, and the high levels of dry powder in the market.
The following sections examine M&A activity in the individual industries of the TMT sector in 2024 in more detail.
Number of deals
Deal type
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Technology
As in previous years, Technology accounts for the vast majority of deals in 2024, with 510 transactions, compared to 42 in Media and Entertainment and 17 in Telecommunications. Interestingly, we saw an unusually large number of public-to-private offers being made by PE investors in the Technology industry in 2024. This started with Software AG, which had already been taken private by Silver Lake in 2023; individual parts of the company were then sold off throughout 2024. Carlyle acquired a majority stake in publicly listed SNP Schneider-Neureither, a German data migration specialist. Currently, CVC is about to buy out the shareholders of medical software provider CompuGroup, while TA Associates bought German medtech software company NEXUS. Bain Capital also tried to buy the Swiss cloud and software services firm SoftwareOne, which finally decided to merge with peer Crayon Group towards the end of 2024. With such a large number of transactions in the Technology industry as a whole, we will now take a closer look at individual sub-industries and investment trends.
Software
Besides the numerous public-to-private deals mentioned above, there are also many private-to-private software deals every year. In fact, software is by far the dominant sub-industry, with 369 transactions in 2024. A deal that drew a lot of attention was the long-awaited sale of Aareon, the banking software arm of Aareal bank. After several years of shareholder pressure demanding a sale, Aareal owners Advent, Centerbridge Partners and CPPIB were finally successful in selling Aareon to TPG and CDPQ for €3.9 billion.
IT services
Besides software vendors, IT services is a very active M&A field, with 88 German assets involved in M&A in 2024. Infosys, the Indian IT services giant, bought In-Tech, a Munich-based software development firm with a focus on manufacturers, including the automotive industry. Publicly traded IT consulting and software development services player Nagarro was in talks with Warburg Pincus with a view to taking the company private, with an expected valuation of up to €1.5 billion. In this particular case, negotiations ended without a deal being reached, but there seems to be no shortage of assets for sale for now. For example, the founder of CAD and CAM solution provider Mensch und Maschine put his firm on M&A radar by saying in a press interview that investors frequently offer to buy him out. Interest in data analytics and big data services companies has also grown significantly, as availability of data is key to training and using AI models.
Semiconductors and hardware
M&A in the semiconductor field attracted less attention in 2024, as the major German corporate Infineon had already concluded a series of divestments and acquisitions in previous years. However, Schott AG did make an important transaction to strengthen its semiconductor business, buying QSIL’s semiconductor manufacturer supplier QSIL Quarzschmelze in Ilmenau, Thuringia.
AI and data centres
While AI-angles of software and IT services assets are widely advertised, most AI-centered businesses are currently still in the venture capital (VC) investment phase and have yet to reach the M&A market. Defence AI software player Helsing is a good example: the company secured €450 million in VC funding in 2024, pushing its value up to €4.95 billion. However, we do expect a considerable number of AI assets to find their way onto the M&A market in the near future. According to “PwC’s 28th Annual Global CEO Survey”, a third of CEOs say that generative AI has increased revenue and profitability over the past year, and as much as half of CEOs expect investment in technology to increase profits in the year ahead. Clearly, CEOs believe that there is a case for investment in AI.
A business model that is fundamental to AI and which has attracted a lot of M&A investment in recent years is data centres. In June 2024, Mainova Webhouse closed a deal with investment giant BlackRock to finance the development of its Frankfurt-based data centres, with a major equity injection in return for just over 50% of its shares. Besides financial investors, strategic investors are also looking to expand their data centre portfolios, such as DTCP – the investment arm of incumbent telco Deutsche Telekom. With DeepSeek gaining popularity, data centre investments in the US became heavily scrutinised. Investments in German data centres have so far been on a much smaller scale, which is why we expect investment in data centres in Germany to continue for now, despite the emergence of infrastructure-light and on-premise-capable AI models.
Media and Entertainment
Our “German Entertainment & Media Outlook 2024-2028” found that consumer habits in Germany remain heavily influenced by traditional media offerings. Non-digital segments accounted for 59.3% of total revenue, generating €44.2 billion in 2023. However, growth in these areas was modest, at 3.6%. In contrast, digital sectors experienced robust growth of 10.3%, with revenues rising to €30.3 billion. A deeper analysis of the data reveals that this growth is being driven primarily by virtual reality and augmented reality (23.9%) and internet video streaming (19.5%). Online advertising (11.9%), music streaming (8.3%) and video games (3.2%) also underwent significant growth. By contrast, the markets for books, newspapers, magazines, TV, and TV advertising – the areas which German media companies tend to focus on – all shrank.
In 2024, we saw 42 deals in the Media and Entertainment space in Germany. Some of the more prominent deals in progress include refinancing for media giant Bertelsmann, which is open to minority investments in its multi-billion euro production arm Fremantle Media and is considering mergers or bolt-on acquisitions for its music label BMG. The owners of Axel Springer are working on separating the corporation’s digital classified ad business from its traditional media business: KKR and CPPIB are planning to take ownership of the former, while the Springer family and the CEO would control the latter. Italian MediaForEurope continues to expand its stake in German TV media peer ProSiebenSat.1, securing loans to finance takeover bids, while ProSiebenSat.1 is trying to divest its internet businesses Flaconi and Verivox. Finally, out-of-home advertisement giant Ströer is in discussions for major divestments or even going private altogether.
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Telecommunications
After many years of an investment frenzy, financing fibre-optic internet expansion in Germany recently became less attractive for investors: this is due to high labour costs and raw material prices pushing up construction costs, and the more challenging geology of the areas where fibre-optic has yet to be installed. On top of this, the take-up rate of fibre broadband in existing networks is still disappointing, with available copper technology seeming to satisfy the demands of many consumers at lower prices. Germany also has a highly fragmented provider landscape with several hundred fibre-optic network operators, and the smaller providers are now struggling with costs.
Consequently, a number of transactions to get providers out of distressed situations have become unavoidable, such as Infracapital selling Infrafiber to Unsere Grüne Glasfaser, a joint venture between Telefónica and Allianz. Some investors have also been looking to divest non-distressed assets as well in order to free up capital to better cope with high interest rates. For example, Altice is trying to sell its stake in OXG Glasfaser, a joint venture with Vodafone. This is part of a pan-European trend of continued deleveraging by selling off telecommunication infrastructure assets: alongside its German fibre-optic joint venture, Altice is also divesting its Portuguese mobile operator business and French mobile group SFR. Another example of this is the divestments being made by Spanish cellular tower corporate Cellnex in order to raise capital to repay debt – these include the recently publicised sale of the company’s Swiss infrastructure and the previously announced divestments of its Austrian and Nordic towers. Similarly, Sunrise Communications is being spun off by Liberty Global.
Ultimately, there are two factors driving M&A activity in the European Telecommunications industry. Firstly, interest rates are still relatively high, which is putting ongoing pressure on telecommunications companies with significant amounts of debt financing their infrastructure. Secondly, the European telco market is very fragmented compared to the USA or China; this creates great potential for mergers to generate synergies. Financial sponsors have frequently stepped in to deploy their dry powder in this capital-intensive market.
Market outlook
While the overall number of deals has declined from its post-pandemic high of 2023 in TMT and other sectors, the further easing of eurozone monetary policy gives reason for optimism that deals will stabilise or even pick up again in 2025.
This optimism is further supported by the still-significant exit backlog among private equity investors and record levels of dry powder. The geopolitical situation and the policies of the new US administration will certainly be a relevant factor of M&A going forward, although it remains to be seen exactly what influence this will have in Germany.
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Werner Ballhaus
Global Leader Entertainment & Media, Partner, PwC Germany
Tel: +49 211 981-5848