Why is New Zealand blocking foreign investment
Foreign investments in German companies will only decline slightly in 2020
PwC analysis of M&A activities by foreign investors in 2020 / Fewer transactions, but with higher average volumes / Share of European investments in Germany increased / Investments in technology sector with significant growth / Private equity participation in small and medium-sized transactions increased
Frankfurt am Main, December 29, 2020
In 2020 there were fewer M&A transactions between foreign investors and German companies than in the previous year. The main reason for this is the coronavirus pandemic and its macroeconomic consequences. This is one of the key findings of the “Destination Germany. M&A activities of foreign investors 2020 ”of the auditing and consulting company PricewaterhouseCoopers (PwC). The analysis takes into account all mergers, company acquisitions and sales, leveraged buyouts, spin-offs, privatizations and acquisitions of minority interests announced between January 1, 2016 and November 15, 2020.
Fewer deals, but higher average volumes
The number of transactions between foreign investors and German investors fell to 745 compared to the same period in the previous year (2019: 755 as of the survey date November 15). For 2020 as a whole, the PwC experts expect a decline in transactions of only 6.6 percentage points (2019: 912, 2020: 852 transactions) and a slightly lower total deal value (61 instead of 64.7 billion euros).
However, at 234 million euros, the average value of transactions is higher than in 2019 (211 million euros).
“The lockdowns in most countries around the world and their economic consequences have understandably led to a decline in M&A activity. There were, however, insignificantly fewer deals overall in 2020. However, it can be said that more deals were made than in 2018 and 2017. This shows that financial investors also see the pandemic as an opportunity and want to use it. The technology and healthcare sectors were particularly interesting for foreign investors. "Steve Roberts, Head of Private Equity at PwC Germany
US investors most active, growing share of European investments
US investors in particular invested in German companies in 2020. As in 2019, their share was by far the largest up to November 15, with 155 deals and a total deal value of 23.5 billion euros. This was followed, as in the previous year, by investors from Great Britain (89 deals, total value of EUR 2.4 billion) and Switzerland (71 deals, total value of EUR 1.4 billion).
Noticeable: The share of European investments (including Russia) in German companies has risen continuously since 2017. Even if there were fewer transactions with European investors overall by mid-November 2020, their share of all transactions rose slightly, from 50 to 52 percent. Looking at the total deal value, the increase in their share is even more pronounced: from 37 percent in 2019 to 46 percent in 2020.
Technology sector is most attractive to investors
Foreign investors invested particularly frequently in German technology companies. A total of 185 transactions took place in this sector - a significant increase of 27 percentage points (2019: 146 transactions).
“This interest is clearly due to COVID-19. The restrictions associated with the pandemic have increased the already great interest in technology topics. "Steve Roberts, Head of Private Equity at PwC Germany
The second most attractive sector for investors was trading with 175 deals, followed by industrial production with 140 completed transactions.
Private equity investors are hesitant about mega deals
Another result of the PwC report: private equity investors (PE) most frequently participated in small and medium-sized transactions up to mid-November 2020 (89 percent of all private equity deals with published deal volume). This corresponds to an increase of 16 percentage points compared to the whole of 2019. Four of the ten mega-deals were made by a financial investor (including the largest deal in Germany: the acquisition of the elevator division of ThyssenKrupp by Advent and Cinven). The absolute number of large and mega deals fell to 14 as of November 15, 2020, compared to 36 in the same period of the previous year. However, participation in this by financial investors has increased slightly by four percent - thus to 54 percent. PwC expert Steve Roberts says: “Private equity investors have actually seen the pandemic and its global effects as an opportunity and have positioned themselves more broadly. They took advantage of every deal opportunity and carried out deals in all segments. Even if the number of mega-deals has decreased, the stakes of financial investors are higher than they were in 2019. For 2021 we expect even stronger participation in German deals - especially when many of the transactions that did not materialize from 2020 come back to life. "
PwC sees it as its job to build social trust and solve important problems. More than 284,000 employees in 155 countries contribute to this with high-quality, industry-specific services in the areas of auditing, tax and management consulting.
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