GERMANY Trends and Developments Contributed by: Anselm Lenhard and Philipp Büchler, LARK
LARK Nymphenburger Str. 1 80335 Munich Germany Tel: +49 89 217 03 89 00 Email: contact@lark.de Web: www.lark.de
Market Overview 2024 in review and trends
tors and strong credit. Sectors such as software and technology as well as healthcare and life sci- ences have proven to be resilient, while transac- tions in the automotive, industrial products and manufacturing sectors – which are more heavily affected by the broader economic and political challenges – saw a decline in 2024. Although narrowing, still significant gaps in the valuation expectations of sellers and buyers con- tinued to drag down M&A activity in Germany in 2024, as in the previous year. In order to bridge the valuation gap and a concomitant financ- ing gap, market participants often use vendor financing as an alternative form of financing. Bank and private credit markets The introduction of the UCITS V Implementa- tion Act in March 2016 – which amended the German Capital Investment Code ( Kapitalan- lagegesetzbuch ) and the German Banking Act ( Kreditwesengesetz ) to allow certain alternative investment funds to originate loans to German borrowers – has fundamentally changed the lending market in Germany. In particular, the mid- market segment of the German leveraged acqui- sition finance market has gradually shifted from a traditional bank market to a market dominated by alternative credit providers, who now consist- ently provide more than half the financings in this market segment. Direct lending typically offers
After a second year of recession in Germany, M&A activity and, accordingly, the number of acquisition financings remained relatively stable compared to 2023, but were significantly lower than the record deal numbers seen in the years before. The second half of 2024 saw a moderate upshift in M&A activity and related acquisition financings, which is continuing into 2025. Several (macro)economic and geopolitical chal- lenges and uncertainties – such as high energy, incidental wage and regulatory costs, the ongo- ing war in Ukraine and the massive trade and foreign policy shifts initiated by the new US administration – are leading to low productivity and weak economic growth in Germany and a general need for a fundamental recalibration of the German industrial model. This backdrop is impacting the German M&A market which, as a consequence, is still subject to high and contin- uous volatility. However, the German mid-market in particular has slowly started to adapt to an elevated interest rate environment and higher energy prices, while inflationary pressures have eased over the last year and interest rates have started to fall, although slower than expected. Meanwhile, lenders have remained selective and focused on high-quality assets, attractive sec-
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