GERMANY Trends and Developments Contributed by: Carsten Berrar and Peter Klormann, Sullivan & Cromwell LLP
Outlook M&A volumes have recently increased globally, driven by an eased monetary policy of central banks in the US and in Europe, non-core corpo - rate divestitures and increased activity by finan - cial sponsors. The German M&A market can - not yet keep pace with such development. The economy is still struggling due to high energy costs, skills shortages and supply chain disrup - tions, as well as severe structural industry shifts and political challenges. At the same time, there are clear signs of increased private equity activity, and many large German corporates see the need for reorganisa - tion, strategic repositioning and add-on acquisi - tions. Key trends such as energy transition and digitalisation are expected to drive further M&A transactions. Companies will continue to use M&A to adapt to new business models, industry trends and technological requirements. Trans - formative corporate transactions and transatlan - tic deals are currently the dominant themes in German M&A. The public-to-private trend also continues.
Generally speaking, Germany retains an investor- friendly policy. This was evidenced again by the most recent official statistics of the BMWK on the duration and outcomes of reviews. In 2024, the level of German FDI notifications remained largely stable, with 261 filings in 2024 compared to 257 in 2023. Over one-third of cases were cleared within 30 days, and another 25% within 40 days; only 11% of reviews took more than 60 days to reach a decision. The number of German FDI cases that required an in-depth assessment (Phase II) continues to be low (approximately 8% in 2023; 7% in 2024) and remedies are only required in certain individual cases (eight in 2024; 12 in 2023). Foreign Subsidies Regulation Since October 2023, the new FSR requires clear - ance from the European Commission, inter alia, for acquisitions of EU targets with revenues of at least EUR500 million if one of the parties involved has been granted significant finan - cial contributions from third countries. The first procedures under this new regime have been completed, but the FSR has placed a significant additional new burden on M&A players. In order to prepare for a review, acquirers and targets alike need to gather, track and put a system in place that enables them to quickly retrieve all relevant information on all relevant contributions received on a group-wide basis, including, in the case of financial investors, portfolio companies. Within the first full year of application, more than 120 transactions were pre-notified, more than 100 of which were then formally filed, according to reports.
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