This website requires Javascript for some parts to function propertly. Your experience may vary.

M&A snapshot: increasing complexity ahead | Hengeler Mueller News
Mergers & Acquisitions

M&A snapshot: increasing complexity ahead

The Russian attack on Ukraine has had an enormous geopolitical impact and an equally significant effect on the M&A market. Alongside ongoing disruptions in the global supply chain, rising inflation and increasing interest rates, the conflict is causing huge uncertainty among market players. Nevertheless, the European and German M&A markets have proven to be quite resilient so far. The long-term M&A outlook also remains promising.

Last year saw more than 11,600 M&A transactions with European targets valued at more than EUR 1,100bn and approx. 1,300 German target deals with a disclosed value of EUR 114bn.* Although this represents a significant decline of almost 44 per cent by value in German target deals compared to the previous record-breaking year, it is surprisingly solid given the current environment. Some key deal drivers, including digital transformation and ESG considerations, will continue to stimulate deal activity.

Overall, we see a large investor appetite for sustainable business models and those that enable sustainability. In addition to traditional investment in renewable energy companies, green tech is very popular - whether agricultural technology, recycling or sustainable mobility. In the wake of the current crisis, numerous companies are looking for energy independence and bringing the necessary expertise in-house for the sustainable transformation of their own business model through acquisitions.

As investors look for traditionally crisis-proof business models with predictable profits, the healthcare and defence sectors should benefit from the current environment, as will the infrastructure, education, construction and food sectors, among others. We anticipate that an increased focus by many companies on their core business will lead to spin-offs of non-core divisions, creating additional opportunities for M&A transactions.

Distressed M&A is also on the rise. We have already seen some major restructurings this year and expect such transactions to increase further in the near future.

The crisis makes transactions more complex and more demanding. Market participants not only have to cope with a challenging financing environment, but they also need to factor in sanctions, stricter investment controls and anti-trust scrutiny, as well as disrupted supply chains and volatile prices. We also have the impression that buyers’ increased caution leads to higher transaction complexity, as negotiations with a small number of interested parties become more intensive in order to find creative contractual solutions. This leads to stronger demand for high-end legal advice.

Overall, we may not be able to match the record volumes of the recent past in 2023. But we expect deal activity in Germany and Europe to remain robust and that transactions with a positive ESG profile will continue to increase.

*Source: Mergermarket

Latest Articles

Government proposal for English-language chambers and commercial courts – will Germany be bolstered as a venue for international commercial disputes?

Is there no Corporate Criminal Liability in Germany? Not exactly.

EU competition law and policy outlook for 2023

Recent Mergers & Acquisitions Work