first half year 2020 m&a market report germany...oaklins – m&a market report germany –...

M&A Market Report Germany

FIRST HALF YEAR 2020

Transactions with German counterparts

DR. FLORIAN VON ALTENMember of Executive Board

T: +49 40 349 14 -168M: +49 152 091 929 49E: [email protected]

DR. BASTIAN BREITMAYERAssociate

T: +49 40 349 14 -246M: +49 152 091 929 73E: [email protected]

OAKLINS – M&A Market Report Germany – First half year 2020

The first half of 2020 was largely determined by the COVID-19 pandemic which had a massive impact on public life and economic activities worldwide. Prevention measures against the spread of the virus varied across countries with different consequences for local economies and M&A activities. How large was the impact of the crisis on the M&A activity in Germany – a country that was able to manage the virus outbreak relatively well?

M&A ACTIVITY AND REPORTED COVID-19 CASES IN GERMANY

At the beginning, the M&A year 2020 made quite a promising start with the number of reported deals being

on previous year level during the first four weeks. After the first reported COVID-19 patient on the 27th of

January and a rising number of reported cases in the following weeks, however, uncertainty about a potential

shutdown was increasing and COVID-19 became the most important determinant of M&A market activity. As

shown in figure 1 on the following page, the number of reported M&A deals continuously decreased after 10th of

February. Particularly during the time of the most rigorous public life restrictions between 25th of March and the

announced lifting on 5th of May, the number of reported deals decreased by -54% compared to previous year’s

period. Overall, for the first half of 2020 we observe a decrease of -27.6% announced M&A deals compared to

H1 2019 – mainly driven by the large decline (-41%) in the second quarter. With declining COVID-19 cases and

lifted restrictions, however, we observe a slight recovery of market activity with 247 reported deals between 5th

of May and the end of June 2020.

As one of the global leading mid-market M&A advisory firms, we would like to provide in-depth insights into the M&A activity in Germany during the first six months of 2020

To get a better understanding of the impact of the spreading virus and economic shutdown measures, we collected

the number of announced and completed M&A deals with at least one German counterpart, i.e. target, buyer or

seller, as well as the reported COVID-19 cases in Germany on a weekly basis. The results of our time series analysis

indicate a strong relation between the reported COVID-19 cases, public life restrictions, and M&A market activity.

Especially transactions among strategic parties have been concerned.


M&A transactions 2019


New COVID-19 cases in Germany

30-Dec-19 24 20 006-Jan-20 76 66 013-Jan-20 45 58 020-Jan-20 61 66 027-Jan-20 69 40 503-Feb-20 54 61 710-Feb-20 33 37 317-Feb-20 51 39 024-Feb-20 52 25 3202-Mar-20 46 48 35309-Mar-20 39 29 196916-Mar-20 39 32 1176923-Mar-20 65 22 2815030-Mar-20 58 30 3740806-Apr-20 45 28 3382913-Apr-20 31 13 2030520-Apr-20 36 20 1655327-Apr-20 58 22 873604-May-20 48 51 818111-May-20 41 34 585218-May-20 40 22 406025-May-20 53 39 324601-Jun-20 60 28 281308-Jun-20 35 18 240315-Jun-20 29 31 286022-Jun-20 59 24 4022

0

10

20

30

40

50

60

70

80

30-D

ec-1

9

06

-Jan

-20

13-J

an-2

0

20-J

an-2

0

27-J

an-2

0

03-

Feb-

20

10-F

eb-2

0

17-F

eb-2

0

24-F

eb-2

0

02-

Mar

-20

09

-Mar

-20

16-M

ar-2

0

23-M

ar-2

0

30-M

ar-2

0

06

-Apr

-20

13-A

pr-2

0

20-A

pr-2

0

27-A

pr-2

0

04-

May

-20

11-M

ay-2

0

18-M

ay-2

0

25-M

ay-2

0

01-

Jun-

20

08-

Jun-

20

15-J

un-2

0

22-J

un-2

0

40

35

30

25

20

15

10

5

0


Num

ber

of tr

ansa

ctio

ns


Num

ber

of C

OV

ID-1

9 c

ases

in th

ousa

nds


First COVID-19 case in Germany

Public life restrictions

Government financial aid

Lifting of restrictions

Number of M&A transactions and reported COVID-19 cases – figure 1

Source: Oaklins, Majunke, Mergermarket, Zephyr, European Union

German investors are cautious about foreign acquisitions

While the number of domestic deals went down by -24% compared to H1 2019, our results show an even larger

drop of -38% for acquisitions of foreign targets by German investors. German investors were increasingly risk

averse and cautious about the virus outbreak prevention measures in other countries. A more detailed look at the

numbers reveals that particularly acquisitions of US targets have declined by -69% to just 18 transactions within the

first half of 2020. Unsurprisingly, 14 of these acquisitions were reported until the 6th of March, before the US was hit

by a major outbreak of the virus. Interestingly, with a drop of only -18% and 28 announced transactions, the United

Kingdom is the most popular country for acquisitions of foreign targets by German investors. Like investments into

US targets, more than 70% (20) of transactions were announced or completed by the end of March.


Acquistions of foreign targets

Domestic deals Acqusitions made by foreign buyers


30-Dec-19 4 13 3 006-Jan-20 16 30 20 013-Jan-20 21 23 14 020-Jan-20 18 29 19 027-Jan-20 12 22 6 503-Feb-20 16 27 18 710-Feb-20 3 20 14 317-Feb-20 8 21 10 024-Feb-20 10 12 3 3202-Mar-20 4 26 18 35309-Mar-20 2 14 13 196916-Mar-20 9 8 15 1176923-Mar-20 4 9 9 2815030-Mar-20 5 18 7 3740806-Apr-20 3 17 8 3382913-Apr-20 1 4 8 2030520-Apr-20 8 7 5 1655327-Apr-20 4 14 4 873604-May-20 11 22 18 818111-May-20 6 18 10 585218-May-20 4 10 8 406025-May-20 10 17 12 324601-Jun-20 6 16 6 281308-Jun-20 1 8 9 240315-Jun-20 6 18 7 286022-Jun-20 3 13 8 4022

0

5

10

15

20

25

30

35

30-D

ec-1

9

06

-Jan

-20

13-J

an-2

0

20-J

an-2

0

27-J

an-2

0

03-

Feb-

20

10-F

eb-2

0

17-F

eb-2

0

24-F

eb-2

0

02-

Mar

-20

09

-Mar

-20

16-M

ar-2

0

23-M

ar-2

0

30-M

ar-2

0

06

-Apr

-20

13-A

pr-2

0

20-A

pr-2

0

27-A

pr-2

0

04-

May

-20

11-M

ay-2

0

18-M

ay-2

0

25-M

ay-2

0

01-

Jun-

20

08-

Jun-

20

15-J

un-2

0

22-J

un-2

0

40

35

30

25

20

15

10

5

0

Acquistions of foreign targets

Num

ber

of tr

ansa

ctio

ns

Domestic deals

Num

ber

of C

OV

ID-1

9 c

ases

in th

ousa

nds


Acqusitions made by foreign buyers

Comparing domestic and cross-border transactions – figure 2

Buyer country ranking (excl. German buyers) – figure 3


Looking at acquisitions of German targets by foreign investors reveals 55 announced deals (only a 5% drop) by

US investors, showing acquisitions on a stable level and leaving the US on rank 1st of the most active foreign investor

countries in Germany. In contrast, we record a significant activity decrease of European investors. Acquisitions of

investors from France, the United Kingdom, Switzerland, the Netherlands, and Austria have all declined by at least

-30% and up to -59% compared to the previous year. With nine announced transactions, only Belgian investors

have increased their activity on the German market.

Surprisingly, Japan claims the 5th position in the ranking of most active buyer countries with 14 reported deals and

has overtaken China in the first half of 2020. We have reported similar results for the first half of 2019, however,

in the whole year table of 2019, China ranked before Japan again. In the first half of 2020, Chinese investors have

announced 13 takeovers of German targets and thereby reached previous year’s level.

Rank Buyer Country H1 2020 H1 2019 Difference to H1 2019 Change in % Share of total

1 United States 55 58 -3 -5% 6%

2 France 26 37 -11 -30% 3%

3 United Kingdom 20 32 -12 -38% 2%

4 Switzerland 19 28 -9 -32% 2%

5 Japan 14 19 -5 -26% 2%

6 China 13 13 0 0% 1%

7 Netherlands 11 27 -16 -59% 1%

8 Austria 11 19 -8 -42% 1%

9 Sweden 11 18 -7 -39% 1%

10 Belgium 9 5 4 80% 1%

Source: Oaklins, Majunke, Mergermarket, Zephyr


FOCUS ON THE TMT AND BUSINESS SERVICES SECTOR – LARGE DECLINE IN RETAIL AND AUTOMOTIVE

We observe large differences in the sector ranking. With public life restrictions, closed retailers, and increasing

working from home agreements, sectors such as TMT and Business Services were the winners of the Corona crisis.

In line with the stock exchange developments, our results show a +15% and +3% increase in M&A deal activity for

the TMT and Business Services sectors compared to H1 2019, respectively. Ranking as the 3rd most active sector,

M&A activity in the Healthcare industry remains overall on a stable level. On the other hand, industries that were

largely negatively affected by the public life restrictions also record significantly less M&A deals. Especially the

number of Retail and Automotive deals declined by -60%. The results of our sector analysis clearly show how the

Corona crisis has affected the economic activity, uncertainty, and associated M&A activity across different sectors.

H1 2020 H1 2019

TMT 259 225Business Services 178 173

Healthcare 99 104Industrials 72 84

Retail 55 137

0

50

100

150

200

250

300

TMT Business Services Healthcare Industrials Retail

5572

99

178

259

137

84104

173

225

H1 2019 H1 2020

Top 5 most active sectors – figure 4

+15% -60%Reported deals in TMT Reported deals in Retail and Automotive

Source: Oaklins, Majunke, Mergermarket, Zephyr


SHARE OF DEALS WITH PRIVATE EQUITY REACHES A RECORD HIGH OF 33%

Comparing the behaviour of different investors reveals large differences. Strategic investors became increasingly

reluctant to execute or announce takeovers. Particularly during the time of comprehensive travel restrictions within

Germany, the activity of acquisitions made by strategic investors reached a minimum. The board members of most

companies were preoccupied with managing the crisis and maintaining daily operation rather than focusing on

expansion plans. On the other hand, after financial investors had successfully secured the liquidity of their portfolio

companies, they were able to regain their acquisition appetite. Triton, DBAG, and Waterland rank among the most

active financial investors in Germany. Large amounts of dry powder enable financial investors to execute transactions

without major funding of commercial banks and to stay active in the market.

Strategic investors Financial investors New COVID-19 cases in Germany

30-Dec-19 10 9 006-Jan-20 51 13 013-Jan-20 38 19 020-Jan-20 43 22 027-Jan-20 23 16 503-Feb-20 41 18 710-Feb-20 25 11 317-Feb-20 25 13 024-Feb-20 16 9 3202-Mar-20 33 13 35309-Mar-20 18 10 196916-Mar-20 21 11 1176923-Mar-20 13 8 2815030-Mar-20 15 15 3740806-Apr-20 18 10 3382913-Apr-20 7 6 2030520-Apr-20 11 9 1655327-Apr-20 17 5 873604-May-20 37 14 818111-May-20 22 12 585218-May-20 17 5 406025-May-20 27 11 324601-Jun-20 16 12 281308-Jun-20 12 6 240315-Jun-20 21 10 286022-Jun-20 17 7 4022

0

10

20

30

40

50

60

30-D

ec-1

9

06

-Jan

-20

13-J

an-2

0

20-J

an-2

0

27-J

an-2

0

03-

Feb-

20

10-F

eb-2

0

17-F

eb-2

0

24-F

eb-2

0

02-

Mar

-20

09

-Mar

-20

16-M

ar-2

0

23-M

ar-2

0

30-M

ar-2

0

06

-Apr

-20

13-A

pr-2

0

20-A

pr-2

0

27-A

pr-2

0

04-

May

-20

11-M

ay-2

0

18-M

ay-2

0

25-M

ay-2

0

01-

Jun-

20

08-

Jun-

20

15-J

un-2

0

22-J

un-2

0

40

35

30

25

20

15

10

5

0

Strategic investors

Num

ber

of tr

ansa

ctio

ns

Financial investors

Num

ber

of C

OV

ID-1

9 c

ases

in th

ousa

nds


Activity of Financial and Strategic Investors over time – figure 5


In total, financial investors were involved in 33% of

all deals reported in the first half of 2020 which is

a large increase compared to 23% private equity

involvement in the first half of 2019. Our survey

results show that private equity investors are

willing and able to invest into healthy business

models. 84% of participants reported that they

can close transactions without any third-party

financing. Furthermore, most investors will not

claim price discounts for short-term liquidity

issues of solid business models.


22 TMT

Of the top 30 deals were reported before 31st of March

Is the dominant sector for the top 30 deals

TOP DEALS WERE MOSTLY REPORTED IN Q1

By far the most important transaction and only mega deal with a German counterpart was the sale of the highly

profitable elevator business by Thyssenkrupp to Advert International, Cinven, and RAG Stiftung for about

EUR 17.2 bn. The carve out is part of the strategic restructuring process of the German blue-chip company and

was announced on 28th of February 2020. Likewise, 22 of the top 30 deals were announced in the first quarter

2020 which accounts for 89% of the deal volume of the top 30. While the sale of Thyssenkrupp Elevator AG was

the only transaction with a volume above EUR 10 bn, we count two further deals, i.e. the acquisition of Bombardier

Transportation GmbH by the French competitor Alstom (EUR 7.6 bn) and the purchase of Deutsche Glasfaser Holding

GmbH by EQT and OMERS Infrastructure Management (EUR 2.8 bn) above the two billion Euro mark. We count

13 deals with a volume of at least EUR 1 bn.

About half of the top 30 transactions were reported with German buyers, while US and French investors rank second

and third. Despite the large machinery deals, TMT remains the most prominent sector among the top 30 deals.

Month Number of Transactions

Volume in EURm

January 3 2516Feburary 14 29176March 5 10897April 1 1200May 4 1452June 3 2291

0

2

4

6

8

10

12

14

16

January Feburary March April May June

35.000

30.000

25.000

20.000

15.000

10.000

5.000

0

Number of transactions

Num

ber

of tr

ansa

ctio

ns

Volume in EURm

Vol

ume

in E

UR

m

Top 30 deals with at least one German counterpart – figure 6



IN A NUTSHELL

The worldwide spread of the Corona virus was the main blockage of M&A activity in the first half of 2020.

Transactions that seemed to progress well were put on hold or cancelled and new acquisition plans postponed.

During the time of the most rigorous public life restrictions, M&A activity dropped to a minimum. With the step-

by-step lifting of restrictions, we also observe a slight recovery of the M&A market. Particularly sectors that have

benefitted from the crisis record increasing numbers of deals within a short period of time. Overall, prices have

declined across all sectors by a minimum of 1-1.5x EBITDA compared to 2019.

For the second half of 2020 we expect further recovery of M&A activity and reported deals if we don’t experience a

second major outbreak of COVID-19. Besides more frequently reported restructuring cases we expect an increasing

M&A activity of companies that have weathered the storm much better than others. At the same time, the bargain

hunters under the strategic and financial investors are expected to exploit high levels of liquidity and low interest

rates far into the future. In addition, financial investors worldwide possess large amounts of free funds and face

increasing investment pressure due to limited fund maturities. Sectors that were negatively affected by the crisis

will have to accept high price discounts. For companies and sectors that were able to benefit from the political

measures we expect prices on nearly pre-crisis levels.

Most importantly, the M&A activity will depend on the fact whether Germany will face a second outbreak of COVID-19 which would likely bring back uncertainty and hesitation of investors. In this regard, we expect an increasing share of transactions with variable pricing structures, e.g. earn-outs, in order to account for the risk of a second outbreak.

Overall, we expect that the M&A activity on the German market with respect to numbers of transactions and volume will be able to recover and to reach the levels of 2019 and 2018 by the end of 2022.


OAKLINS INTERNATIONAL

Our focus and reach

Oaklins is the world's most experienced midmarket M&A advisor, with 850+ professionals globally and dedicated

industry teams in over 45 countries and 70 offices worldwide. We have closed over 1,500 transactions in the past

five years.

professionals

850+countries

45+transactions

5,500+o�ces

70sectors

15

Oaklins – our locations around the world

Quick facts about Oaklins


OAKLINS GERMANY

Our company

Oaklins Germany (formerly Angermann M&A International AG) is the German team of Oaklins International Inc. and

the oldest M&A advisory firm in Germany. As part of the Angermann Group (with over 200 employees) Oaklins

Germany is specialised in advisory for M&A buy- and sell-side projects, succession plans, carve-outs, as well as the

execution of strategic growth plans. Oaklins Germany has over 20 advisors in three offices.

Our expertise

Since 1953, Oaklins Germany has successfully advised clients in more than 1,000 national and cross-boarder

transactions covering various industries. Over 50% of all transactions were cross-boarder.

What we do

M&A SELL-SIDE

Closing a chapter

ͽ Succession plans

ͽ Carve-outs

ͽ Sale of investment companies

ͽ Share deals

DEBT ADVISORY

Increasing leverage

ͽ Balance sheet structuring / restructuring

ͽ Verification of business plans

ͽ Company valuation

ͽ Expert opinions

M&A BUY-SIDE

Finding a perfect fit

ͽ Strategic expansion plans

ͽ Diversification

ͽ Joint Venture

GROWTH EQUITY & ECM

Getting the right support

ͽ Mediation of equity capital

ͽ Mediation of mezzanine captial

Oaklins Angermann AG

www.oaklins.com/de

Oaklins Germany serves clients from offices in Hamburg, Frankfurt and Berlin.

GERMANY

Hamburg

ABC-Straße 35

20354 Hamburg

+49 40 349 14 170

Frankfurt

Guiollettstraße 48

60325 Frankfurt

+49 69 505 02 911 52

Disclaimer

This report is provided for information purposes only. Oaklins and its member firms make no guarantee,

representation or warranty of any kind regarding the timeliness, accuracy or completeness of its content. This

report is not intended to convey investment advice or solicit investments of any kind whatsoever. No investment

decisions should be taken based on the contents and views expressed herein. Oaklins and its member firms shall

not be responsible for any loss sustained by any person who relies on this publication.

Oaklins is the collective trade name of independent member firms affiliated with Oaklins International Inc. Oaklins

itself does not provide advisory services.

For details of the nature of affiliation, please refer to www.oaklins.com/legal

© 2020 Oaklins. All rights reserved.

Berlin

Lennéstrasse 1

10785 Berlin

+49 30 230 82 828

http://www.oaklins.com/legal

first half year 2020 m&a market report germany...oaklins – m&a market report germany –...

Documents