Temporary End to Major Acquisitions in German Property Market

German property companies' tendency to engage in increasingly large acquisitions seems to have come to an at least temporary end. In February 2016, a majority of the shareholders of the Frankfurt-based property company Deutsche Wohnen voted against a takeover offer from the market leader Vonovia, based in Bochum (formerly Deutsche Annington). The takeover of the second largest property company would have been the largest transaction of all time in the German property market, and would have seen further expansion of the market leader Vonovia. These are the findings of studies carried out by the Centre for European Economic Research (ZEW) on the basis of the Zephyr database of Bureau van Dijk (BvD).

Following the boom in the mid-2000s, the financial crisis brought acquisition activities in the German property market to a near standstill. The number of transactions taking place in 2009, during the financial crisis, was only 33 per cent, whilst the transaction volume totalled only 668 million euro. This constituted respective falls of 54 and 94 per cent from the levels seen in 2007, the most active year in the German property market.

Following the crisis, the number of mergers remained low in comparison to pre-crisis levels. The transaction volume, however, showed significant increases. This development was above all a result of the expansion activities undertaken by Deutsche Annington and Deutsche Wohnen. Deutsche Annington's takeover of its competitor Gagfah for 4.3 billion euro not only caused a stir in the property market, but also contributed more than half of the total transaction volume for 2015. The largest German property corporation, Vonovia, developed as a result of this merger. Deutsche Wohnen was also able to significantly increase its market share through its takeover of GSW Immobilien for 1.7 billion euro, thereby establishing itself as the second largest competitor in the property market.

The failed merger between Vonovia and Deutsche Wohnen is the second large acquisition to have failed in the last six months. In October 2015, a possible takeover of LEG by Deutsche Wohnen for a value of around eight billion euro also failed as a result of objections raised by the shareholders of Deutsche Wohnen.

For more information please contact<o:p></o:p>

Niklas Dürr, Phone +49/621/1235-386, E-mail duerr@zew.de<o:p></o:p>