KfW Research: Domestic investors hesitant in German SME acquisitions
Mergers and acquisitions of German SMEs have fallen significantly post-COVID, with domestic investors showing increased caution. Foreign buyers are showing greater interest.
The volume of mergers and acquisitions (M&A) involving German small and medium-sized enterprises (SMEs) has declined considerably in recent years. According to KfW Research, the number of transactions between 2020 and 2023 was approximately 35% lower than the pre-COVID-19 rate. After a peak of around 1,300 M&A deals in the SME sector in 2017, the figure dropped to 760 in 2021 and has remained low since.
Analysis based on the Moody's Orbis M&A database reveals a significant shift in the profile of acquirers. Previously, domestic companies were the most frequent buyers of German SMEs. Since the COVID-19 crisis, the share of German acquirers has fallen from 61% (2005-2019) to 51% (2020-2023). Concurrently, European companies have shown increased interest, now accounting for 30% of all transactions.
US investors remain significant, responsible for approximately 9.4% of M&A deals between 2020 and 2023. Within Germany, manufacturing companies attract the most interest, accounting for 33.4% of transactions, followed by information and communication technology (ICT) firms at 27.6%. The interest in ICT companies has risen notably compared to the pre-pandemic period.
Amid significant global shifts, companies are pursuing strategic adjustments, where acquisitions can play a part. "Current global developments and trends are demanding that many companies embark on strategic changes, which can be radical for some. Acquisitions or mergers with other companies can help businesses transition," explained Dr. Juliane Gerstenberger, Senior Economist at KfW. She highlighted the decrease in domestic acquirer share post-crisis.