GERMANY Trends and Developments Contributed by: Georg Linde, Kamyar Abrar and Florian Dendl, Willkie Farr & Gallagher LLP
Willkie Farr & Gallagher LLP An der Welle 4 60322 Frankfurt am Main Germany Tel: +49 69 793020
Fax: +49 69 79302222 Email: info@willkie.com Web: www.willkie.com
The transaction market in 2025 appears to have recovered, supported by stabilised interest rates, a decrease in inflation, and increasing exits. In Q1 2025, global private equity acquisitions increased 45% by volume and value more than doubled compared to Q1 2024. However, geopolitical tensions, trade bar - riers and regulatory complexity continue to present challenges. In light of the current developments in the Middle East, the war in Ukraine, the India-Pakistan conflicts, the Taiwan-China tensions, and the glob - al trade barriers, the question remains whether the upward trend will continue in the second half of the year. The rise of AI and digital tools is reshaping value creation at both the portfolio level and in terms of how deals are sourced. This introduces a new market-influ - encing factor. Market Momentum Returns Following a modest rebound in 2024, the private equi - ty market in 2025 has witnessed a marked accelera - tion in deal activity, particularly within the mid-market segment. In Germany, private equity exit activity expe - rienced a robust resurgence in Q1 2025, with total exit value rising nearly 40% quarter-over-quarter to EUR 11 billion, despite subdued IPO conditions. Notably, the Q1 exit volume already accounts for 42% of the full-year total for 2024, suggesting a strong trajectory for the remainder of the year and improving liquidity prospects for sponsors. That said, Germany remains a key destination for private equity investors, espe - cially those targeting family- and founder-owned busi - nesses and carve-outs from industrial conglomerates. Additive transaction strategies are gaining traction, particularly in fragmented service industries, as the
rising trend of investments in audit and tax consul - tancy firms shows, signalling a strategic shift towards stable, cash-generative service models. Still, the recovery comes not without fragility. We are facing continuous economic volatility, political unpredictability and geopolitical uncertainty. Despite temporary cool-off periods, ongoing conflicts in the Middle East have escalated and extended sharply in recent times. This fits into the bigger picture of resur - gent or ongoing conflicts with uncertain duration and outcome. The global markets are reflecting this and are experiencing significant fluctuations. Rising geo - political and economic tensions, particularly between the US, Europe, and China, are contributing to greater uncertainty in global markets. Recent tariff measures, particularly those targeting steel, aluminium, and automotive parts, have heightened pressure on global supply chains and increased input costs in key sec - tors such as manufacturing and mobility. For instance, German car manufacturers anticipate ongoing profit margin erosion in Q2 2025 due to these levies. Simi - larly, steel companies such as Salzgitter reported a 37.6% profit decline in Q1 2025, underscoring the sector’s exposure to global trade dynamics. In response, private equity investors in Germany are increasingly shifting focus towards domestically ori - ented businesses and sectors with limited vulner - ability to cross-border trade disruptions. Additionally, the changing trade landscape has led investors to favour sectors such as healthcare, B2B software- as-a-service (SaaS), and industrial automation and digitalisation. These areas are less affected by tar -
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