GERMANY Trends and Developments Contributed by: Carsten Berrar and Peter Klormann, Sullivan & Cromwell LLP
Shifts in M&A strategies In the recent uncertain economic and political landscape, strategic acquirers have been adapt - ing their M&A strategies. Instead of the tradition - al approach of primarily seeking cost synergies in scale deals and revenue synergies in scope deals, companies in many cases needed to offer both in order to be attractive as targets. Overall, buyers became more selective in their acquisi - tions, demanded more tangible value creation and were less willing to pay for long-term growth potential. In some industries, deal making was particularly hampered by the uncertainty of future development, such as in the energy and chemical sectors. General hesitation also made transactions difficult in the automotive industry. Compared to the situation two years ago, the “valuation gap” between sellers and buyers has generally narrowed. In certain areas, such as software, tech and AI, deals take place at fairly high prices. In other areas, however, many sell - ers still have high valuation expectations that are not fully adjusted to the general market volatility and uncertain economic conditions. Transatlantic M&A The United States continues to be Germany’s most important partner for cross-border trans - actions. This trend intensified in 2024 and was one of the major M&A topics of the year. German buyers seek to benefit from the stronger eco - nomic environment and increased growth oppor - tunities overseas, despite the higher valuations. The US currently also offers cheaper access to energy resources and the possibility to mitigate exposure to Asia. Transatlantic M&A activity is expected to continue to increase in the future, not least in view of the US tariffs imposed by the Trump administration, which may further hamper growth in Europe and Germany in particular, and the planned tax cuts for US companies.
2024 saw a significant increase in US acquisi - tions by German companies, with the 40 Dax and 50 MDax companies spending more than USD30 billion on such acquisitions, according to reports. By comparison, the figure for 2023 was less than USD5 billion dollars. One exam - ple of a major company executing a significant US acquisition was Robert Bosch’s largest ever transaction, in which it acquired Johnson Con - trol’s global heating, ventilation and air condi - tioning solutions business. Also notable in this context is the joint venture established by Volk - swagen and US company Rivian Automotive, and Siemens’ (pending) takeover of US software company Altair. At the same time, US buyers have always had and – despite serious concerns about the Ger - man economy – still have a keen interest in acquiring German companies, which are inno - vation leaders in a number of industries and can offer market entry to Europe at attractive prices in relative terms. However, higher energy costs, lower growth prospects and declining foreign exchange rate benefits have also stoked hesi - tance. Another major theme of German M&A in 2024 was industries in transformation and transfor- mational corporate transactions. In the more recent challenging economic environment and with strong pressure to deliver on industry trans - formation, many companies are seeking to sim - plify their corporate structure, adapt to chang - ing industries and realise cost savings. This has resulted in more conglomerates restructuring and divesting certain business parts through “carve-outs” or “spin-off” transactions, a trend that further intensified in 2024. The new German rules of the EU Mobility Directive, which came Industries in transformation and transformational transactions
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