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2025 was a year of transition for M&A in Germany: despite tariffs, economic weakness, and political uncertainty, deal activity remained at a steady level.
Deal sentiment was defined by cautious optimism amid structural transformation and macroeconomic headwinds, with a notable shift toward larger, higher-value strategic deals despite a decline in total transaction volume. Germany continues to be a key region for M&A activity globally, taking sixth position for most active target nation by deal value, up from ninth last year.
Private capital activity gained momentum, driven by the need to deploy substantial dry powder and the pursuit of operational value creation. Dealmakers were balancing transformation pressure (digitalisation, decarbonisation, defence) against persistent uncertainties (geopolitics, financing costs). Financial sponsors were directly involved in nearly 70% of German M&A deal value recorded in 2025, solidifying the role of private capital in the M&A ecosystem.
Ageing portfolios and extended holding periods are pushing sponsors towards more disposals, and have become one of the key drivers of the deal pipeline.
Buy‑and‑build strategies have gained importance as private capital exploits fragmentation in software, services and healthcare.
Major transactions included the €7.7 billion sale of the BASF SE coatings business to The Carlyle Group, majority buyout of STADA Arzneimittel AG for €10.0 billion by CapVest Partners and the acquisition of CECONOMY AG (Media Markt/Saturn) by JD.com Inc. for €2.2 billion.
Notable deals also included the acquisition of Apleona Group GmbH by Bain Capital & Mubadala for approximately €4 billion and the €3.5 billion acquisition of Viridium Group by Allianz, BlackRock & T&D Holdings.
Market trends and deal drivers
Inbound M&A remained the main driver as foreign investors accounted for a substantial share of volume, especially in infrastructure, energy and software. On the other hand, outbound activity of German buyers remained more cautious, reflecting geopolitical tensions and financing costs.
There was a visible increase in turnaround and distressed situations in cyclical sectors such as retail and automotive suppliers. Stressed sectors like retail and automotive suppliers witnessed distressed M&A, turnarounds and carve‑outs. In the mid‑market, succession‑driven deals, often backed by financial investors, formed a distinct transaction cluster.
Carve‑outs from large corporates, driven by portfolio focus and decarbonisation pressure, formed a stable source of deal flow.
Dealmaking in many cases was driven by technological and environmental imperatives, including the acquisition of AI capabilities, digitalisation, and investments in energy transition and infrastructure.
Technology, Media, & Telecoms (TMT) was the most active sector by deal volume, driven by the AI boom and the need for digital transformation. The energy sector was a major focus in 2025, accounting for over one quarter of deal value.
"Germany continues to be a key region for M&A activity globally, taking sixth position for most active target nation by deal value, up from ninth last year.
Key challenges in deal-making
Geopolitical risks (war in Ukraine, tensions with China, conflicts in the Middle East) remained the most important external headwind for M&A and PE plans. In addition, the second Trump administration added uncertainty to global trade (tariffs, sanctions, “friendshoring”), causing German corporates to be more cautious on outbound M&A.
At the same time, the security environment triggered a massive increase in German defence spending and supported M&A in security, defence and infrastructure‑related clusters.
The expanding regulatory landscape, including new ESG (Environmental, Social, and Governance) requirements, FDI (Foreign Direct Investment) screening, industrial policy interventions and antitrust uncertainty were cited as deal risks leading to longer timelines, though they did not fundamentally derail the market. Some of the key sectors where this made an impact included critical infrastructure, healthcare, defence‑adjacent technologies, semiconductors, AI and data infrastructure.
For a few sensitive sectors, acquiring just 10% of the voting rights triggers a mandatory notification to the Federal Ministry for Economic Affairs and Climate Action (BMWK). In addition, it can be argued that the BMWK has become more interventionist. Transactions are strictly suspended during the review process. Closing before clearance (gun-jumping) may lead to criminal penalties and the transaction being deemed legally void. ESG is no longer merely a ‘due diligence' checkbox. It is a statutory liability issue. In 2025, the EU AI Act added another layer of complexity to M&A due diligence in Germany.
Consequently, market participants responded with more stringent due diligence (including cyber, ESG and geopolitical supply chains) and more creative structures (earn‑outs, vendor loans, minority stakes).
As Germany remains a high‑tax jurisdiction, investment appetite, particularly in the small and mid‑cap space continues to be dampened. Ongoing debates about competitiveness, energy prices and bureaucracy fuelled long‑term concerns about Germany's attractiveness as a business location.
Another challenge was the discrepancy between buyers' and sellers' price expectations, often necessitating creative deal structures like earn-outs to close transactions.
Germany still faces economic stagnation and lingering high financing costs; although interest rates have eased since mid‑2024, credit remains tight — especially for mid‑sized buyers. In fact, financing costs were the number‑one obstacle for acquirers in 2025 (top risk for around two-thirds of companies).
Outlook for 2026 and conclusion
The outlook for M&A in Germany in 2026 is positive, with a clear expected upturn in activity driven by strategic transformations, significant pressure on private capital players to deploy capital, and the resolution of an existing deal backlog.
A KPMG survey found that 42% of market players anticipate an increase in M&A activity, with companies and investors planning a higher number of deals. Goldman Sachs forecasts that higher government spending on infrastructure and defence will boost Germany's GDP growth, providing a supportive economic backdrop for increased dealmaking.
We think Germany's M&A market in 2026 is poised for modest expansion — driven by business successions in the Mittelstand (mid-sized companies), foreign buyer interest (particularly from the US), and AI and digital transformation-led deals — underpinned by cautious sentiment due to macro and geopolitical headwinds. Meanwhile, private capital is expected to see stable value growth and rising deal volume, supported by strategic use of technology, credit innovations, and growing investor confidence, with regulatory and exit execution challenges remaining.
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