New record: Foreign investors to buy more than 850 German companies in 2016

In 2016, foreign investors acquired more German companies than ever before. By mid-November, M&A experts at PwC had counted a total of 756 deals – a figure which surpassed last year’s record in just 10 1/2 months. For the entire year, PwC expects to see well over 850 acquisitions, which represents an increase of around 20% to prior year. “It is worth noting that German companies are also becoming increasingly attractive for investors in emerging markets. In 2015, 60% of all buyers were based in one of the seven major industrialised countries. But now in 2016, it was just 45%,” says Steve Roberts, Partner and Head of Private Equity at PwC.

A particularly spectacular upsurge in takeovers was seen in the technology sector. By mid-November, 141 transactions had already been concluded or at least announced – which amounts to almost double the number of takeovers within just three years (in 2013 there were just 78). In the year’s largest tech deal, the Dutch company ASML acquired a stake in SMT, a business group of Carl Zeiss, for €1 billion. Another deal that made headlines was the US financial investor Warburg Pincus’s acquisition of a stake in United Internet’s Business Applications division.

“The private equity industry in particular has discovered the German technology sector, as illustrated by the fact that the number of tech deals has increased more than fivefold since 2013. For financial investors, it is not only a matter of the companies themselves. Rather, they want their entire portfolio to profit from technologies “Made in Germany” – and for these to create corresponding synergies,” explains Roberts.

The number of private equity deals in general also rose disproportionately. By mid-November, financial investors were responsible for 266 takeovers – a figure which PwC experts think is likely to grow and surpass 300 by year end. Compared to the previous year, this would represent an increase of around 25%. Also noteworthy is the fact that, when taking into account all acquisitions of German companies by foreign investors, the private equity share now stands at an impressive 35%. “Most investors look first and foremost for companies in the industrial production sector. In this respect, Germany is a natural target market for many private equity firms. Further factors that come into play are the stability of the local economy and the wide range of exciting medium-sized businesses,” says Roberts.

Further results of the study at a glance:

• Percentage of US and UK investors in decline: Just as in the prior years, in 2016 US investors made by far the largest number of deals in Germany: 136 by mid-November. However, their share of total deals fell considerably, from 25% to just 18%. In second and third place come Switzerland (78 deals) and France (71 deals), respectively. China is now ranked fourth with 70 transactions, while Great Britain, with only 68 takeovers, slipped from second to fifth place.
• Particular focus on industrial companies: With 188 deals, companies involved in industrial production stood at the very top of foreign investors’ buy lists. In contrast, the retail and consumer goods industry slipped to second place with just 142 deals, just barely ahead of the tech industry. The sharpest drop was seen in the real estate sector, which saw a mere 54 deals by mid-November, making this year likely to even lag behind 2015 (72 deals) – possibly an indication that prices in the sector have now reached quite a high level.
• Fewer megadeals than in 2015: Although the number of acquisitions in 2016 significantly increased, the average transaction value, €213 million, still fell short of that in the previous year (€280 million). The largest single transaction was the €4.1 billion takeover of the robot manufacturer Kuka by the Chinese Midea Group. This was followed by US investor Blackstone’s acquisition of real estate company Office First for €3.3 billion, and the €2.9 billion takeover of the specialty chemicals company Atotech by another private equity company, Carlyle.