Upturn For Mergers And Acquisitions in Germany
ResearchThe German economy is developing well in 2011, causing an upturn of the mergers and acquisitions (M&A). The negative trend observed in Germany during the last two years appears to be overcome. This is the result of a forecast by the Centre for European Economic Research (ZEW) Mannheim.
Based on the Zephyr database by Bureau van Dijk (BvD), ZEW developed an M&A Index for Germany and projected its future trend until the beginning of 2012. While the indicator stood at a record low of 32 points in November 2010, it reached a level of 46 points in January 2011. This value is still considerably below its starting value of 100 points in January 2000. However, the twelve months forecast calculated by ZEW indicates the bottoming out and upwards trend by the beginning of 2012, provided that the events in Japan and North Africa have no or only small negative impacts on the economic development in Germany.
"The record profits of German firms and the strong economic growth in Germany will lead to increasing activities on the M&A market in 2011, which will continue next year," says Tobias Spanka, General Manager BvD.
In comparison to the worldwide M&A activities, the development of the German M&A market is considerably less dynamic. Following the slump after the economic crisis, a gradual stabilisation of worldwide economies was observed in 2010. Germany, however, registered another recession at that time. This development could be explained by the fact that in 2010 German firms primarily focused on internal restructuring. In the meantime, corporate management strategies do not solely focus on restructuring but rather see mergers and acquisitions as possible growth strategies.
The overall optimistic view of the M&A development in Germany is mainly due to the terms of financing which have considerably improved since the end of 2009. For instance, firms have sufficient equity again, banks are more generously in lending, and the interest rates are still low.
The ZEW-Zephyr M&A Index was developed specifically for Germany and tracks the development of mergers and acquisitions since 2000, based on the Zephyr database by Bureau van Dijk (BvD). The ZEW-Zephyr M&A Index for Germany is calculated using the number of M&A transactions in Germany, only factoring in mergers and acquisitions of German firms. The origin country of buyers or partner does not play a role in the calculation. This means that both German and foreign buyers but only target firms located in Germany are taken into account.
In particular, macroeconomic conditions, like the economic development or the development of financial markets, determine the M&A activities. Based on an empiric study, the forecast of the M&A activities in Germany is calculated by means of the OECD composite leading indicator (CLI) for Germany, the long-term level of interest rates, the development of DAX, and the number of rumours of future mergers.
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