The M&A landscape for DAX and MDAX companies in 2015 to 2024 has mirrored the volatility of global markets and geopolitics over the past decade as well as the past twelve months.

In 2024, Germany's economy faced a convergence of challenges: high energy and borrowing costs, the pressures of geopolitical uncertainty constraining its export-driven model, and amplified competition for the German automotive sector from foreign electric vehicle makers.

These headwinds also delayed the anticipated rebound in M&A activity in 2024. Instead, we have seen another year of slowdown: acquisitions and investments announced by the DAX companies dropped from 218 in 2023 to 187 in 2024 – a 14 per cent decline compared to 2023. MDAX companies experienced a similar downturn, with deal numbers falling by 20 per cent from 68 to 54. This sharp reduction in announced deals, especially for MDAX companies, implies increasing caution among potential purchasers (for the reasons explained above) as well as gaps in valuations and deal terms between sellers and investors.

But if you look at the value invested in 2024, combined acquisitions and investments of the 90 MDAX and DAX companies saw an increase in value of 81.2 per cent. This significant uptick was driven predominantly by deals with transaction values over $1bn. This revival of larger mid-cap and large-cap transactions is a sign that where valuations are right and acquirers have gotten comfortable with the risk profile of the target company, they are still prepared to deploy significant amounts of cash or their own stock to pursue inorganic growth.

DAX companies invest massively into the US

Between 2015 and 2024, Europe emerged as the top destination for DAX and MDAX investments and acquisitions outside of Germany, with 1,078 transactions (36.6 per cent of all deals). North America followed with 696 deals, narrowly ahead of Germany at 630. Together, these three regions accounted for 81.6 per cent of all deal activity.

However, in terms of announced value, North America led, capturing 48 per cent of the total deal value over the last decade. Looking specifically at deal values in 2024, companies from DAX were the main drivers of a sharp increase in US investment, with their spending rising from $2bn in 2023 to nearly $30bn in 2024. Here, it must be noted that the three top deals count for two-thirds of this. Meanwhile, DAX companies are investing less in Europe outside Germany.

The ‘Digital’ sector, encompassing software, IT consulting and semiconductors, continues to be a key target sector for inorganic growth of Germany’s largest listed companies, accounting for 25.4 per cent of total deal volume over the past decade. This focus has further increased since the COVID-19 pandemic and amid a slowdown of M&A activity in other sectors, with tech deals rising to almost one third (32.6 per cent) of total activity between 2022 and 2024. This underscores German companies' commitment to digital transformation and their pursuit of acquisitions and investments in this space across the globe – to acquire innovative technologies, hire talent and expand into new growth areas.

Unsurprisingly, Industrials & Materials followed as the second most active sector between 2015 and 2024, accounting for 18.2 per cent of the overall deal count. The Consumer space was the third most active destination sector.

Emerging market deals by DAX and MDAX companies peaked at 56 in 2021 in the past decade. The number plummeted to just 21 deals in 2024, a ten-year low. Whether this signifies a long-term shift away from investments in emerging markets remains to be seen in the coming years and will strongly depend on geopolitical dynamics, global trade policy and domestic demand in these countries.

China was the most favoured emerging markets destination of these 90 companies in the last decade. India, which was the second most active destination for the DAX and MDAX companies over the last decade, saw 10 acquisitions and investments in 2020, dropping to just 3 in 2021 before recovering to 8 in 2023 and dropping back to just one announced deal in 2024.

Instead, Poland led DAX and MDAX activity in emerging markets, with 5 deals recorded in 2024.

Looking ahead, M&A will remain a vital tool to drive innovation, inorganic growth and transformative change in Germany’s economy, despite domestic challenges, intensifying global competition and overall economic and geopolitical volatility. While more favourable borrowing conditions and a more stable global trade landscape will be important prerequisites for a significant rebound of M&A activity in 2025, we expect continued growth in the following sectors:

1. The technology and digital sectors will continue to play a pivotal role, underpinning innovation and exponential growth. As market conditions improve and valuations rebound, liquidity needs and longstanding investors may prompt emerging companies to consider exits again.

2. Carve-out transactions are poised to rise as companies streamline their portfolios to address market pressures and focus on high-growth areas. German corporates are expected to continue to pursue carve-out and spin transactions and are equally well-positioned to capitalise on upcoming opportunities.

3. As Germany’s election campaign progresses at the start of 2025, energy policy remains a vital topic, with various reform proposals aimed at addressing high energy costs and security of supply. While short-term uncertainty may weigh on investor confidence, post-election regulatory clarity in late 2025 could accelerate renewable energy M&A. Companies in various industries will continue to acquire capabilities to enhance renewable portfolios, aligning with the growing demand for clean energy technologies and regulatory incentives.
 
4. Geopolitical factors will remain key drivers – and also dampening factors – of M&A activity. Rising defence spending across Europe is likely to drive consolidation in the defence sector. To address mounting pressures to innovate and scale, defence companies are expected to pursue strategic combinations, enhancing technological capabilities to meet growing demand for advanced solutions. The sector’s strategic importance and drive for innovation will position it as a focal point for M&A.

Opportunities abound in these sectors and beyond, despite current challenges and so the potential for transformative growth is immense. In fact, geopolitical uncertainty, regulatory shift, and macroeconomic factors like tighter credit markets and changes in tariffs and trade policy underscore the need for strategic agility - companies adept at navigating these complexities can unlock significant opportunities. While high financing costs may temper near-term activity, companies with strong balance sheets and clear visions are well-placed to seize attractive acquisition and investment opportunities in 2025 and beyond.

Looking at the DAX and MDAX companies, using cash reserves as a proxy for M&A capacity suggests that these companies may turn to inorganic growth strategies as capital costs stabilise and market conditions improve. The average DAX company holds around $11.2bn, compared to $1.7bn for MDAX companies. With an average M&A deal value in 2024 of $329m, German public companies are well-equipped to execute multiple transactions, and so the key question remains: Will 2025 mark the return of transformative M&A?

The 40 DAX and 50 MDAX constituents are the largest German companies by market capitalisation and turnover listed on the Prime Standard segment of the Frankfurt stock exchange, according to constituent lists and LSEG.

This study is based on the activities of those companies that were represented in one of the two indices as of 10th October 2024, when preliminary data was ran.

It covers the 10-year period 1 January 2015 to 31 December 2024 and captures 'strategic investments', i.e. completed or announced mergers, acquisitions, and investments through which DAX and MDAX companies have acquired a significant stake in another company or one of its businesses. Please note: We are looking at Acquiror side only - this takes into account the following: Acquiror, Acquiror Mid Parent, Acquiror Immediate Parent and Acquiror Ultimate Parent. We have also included Investor, Investor Immediate Parent, Investor Mid Parent and Investor Ultimate Parent deals. Data has been ran using SDC Platinum via Refinitiv

The classification of the 24 selected countries as emerging economies is based on classifications used by the MSCI within their Emerging Markets Index, which can be found here.

The conclusions drawn in this study are primarily based on the number of deals as opposed to the published deal value. There are two reasons for this: firstly, a transaction value is not publicly disclosed for each deal. Moreover, experience shows that the number of transactions says more about an M&A market than the prices paid for a company – in particular, so-called 'mega deals' can lead to a distorted picture if average deal values are used as a basis for analysis.

Note: Some duplication of deals may be included where a deal participant on the acquiror side or investor side includes both a DAX and an MDAX company e.g. Traton/VW. Furthermore, the value of the $41bn deal of Abertis Infraestructuras SA by Abertis Infraestructuras SA SPV has not been included in these figures. As a consortium deal, with only one minority participant being a member of the MDAX Index, it would not be prudent to credit full deal value in this case. Furthermore, to keep trends consistent and to not distort the overall piece, value has removed.

The report is based on data from LSEG and Freshfields' own intelligence.