M&A Deals: 2022 Begins at a Slower Pace in Germany
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Merger and acquisition deals in Germany fell to a six-year low in number and value during Q1 2022
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The M&A deals registered slow growth due to the financial and geopolitical uncertainties in Germany
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Germany reported a total of 36 M&A deals worth $16.5 billion in Q1 2021 compared to 34 deals worth $6.4 billion in Q1 2022
M&A Deals: 2022 Begins at a Slower Pace in Germany
As of March 29, 2022, Germany's number of mergers and acquisitions in the first quarter of 2022 stood at 34, the lowest since 2016. According to GlobalData's Deals database, the total value of these 34 deals was $6.4 billion. M&A deals reported an annual decline of nearly 62% in deal size, and the number of deals during the same period decreased by 6%. According to the database, the largest deal in 2022 was Körber's acquisition of Siemens Logistics's mail and parcel business in February 2022 for $1.3 billion. This compares with the largest deal in 2021, Vonovia acquiring a majority stake in Deutsche Wohnen for $22.5 billion.
Cautious Approach to New Investments
In 2021, when most COVID-related disruption decreased, investments increased, businesses disposed of their non-core businesses and focused more on their core business, making inroads into newer markets. Consequently, a flurry of deals kept the market buoyant for the remainder of the year. However, since COVID-19 caused disruption in the supply chain and the Russia-Ukraine conflict caused geopolitical instability, authorities are expected to increase the inspection of international transactions, especially in sensitive sectors.
The uncertainty arising due to the war has led investors to take a precautionary approach to investment. Investors are cautious and seek to examine the exposure of a business to the current conflict before making an investment decision. Thus, owing to the increasing uncertainty caused by the war, a volatile market, supply chain disruptions, higher interest rates, increasing inflation, increased taxes, and greater regulation of the financial markets, deal-making in various sectors in the current market in Germany could get delayed.
Transatlantic Opportunities
Overall, the beginning of 2022 is marked by slow deal-making in Germany; however, transatlantic relations became more robust, and the North American markets began to open up to European companies for business. Although the current geopolitical conditions remained non-conducive, Germany reported several business deals, especially in the technology sector. The most recent deal was the German marketing agency Oddity, acquired by the Indian IT giant Infosys. Recently, a South American company, Betterware de Mexico, acquired 100% of JAFRA's operations in Mexico and the United States from a German company, Vorwerk Group, for $255 million.
The number of M&A deals is expected to increase with improvement in the geopolitical environment and companies making decisive investments in their businesses.
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