M&A Activity Involving German Firms Collapses

The number of mergers and acquisitions (M&A) involving German firms has fallen sharply since the beginning of 2019. The indicator’s performance proved particularly weak in April and May 2019. In April, the ZEW-ZEPHYR M&A Index dropped to 58 points, its lowest level ever. In May, it climbed only two points to 60, the German M&A market’s second-poorest showing.

The 12-month moving average has also tanked since January, dropping 21 points. Never before has the index – which was established in 2005 – fallen so far so quickly. In June and July, the ZEW-ZEPHYR M&A Index recovered slightly but still remained far below average. The ZEW-ZEPHYR M&A Index tracks the monthly number of M&A deals completed in Germany and is calculated by ZEW Mannheim on the basis of the Zephyr database of Bureau van Dijk.

“Since the beginning of this year, many corporate decision-makers have been reluctant to make large investments, including in mergers and acquisitions,” says Dr. Niklas Dürr, a researcher in ZEW’s Research Department “Economics of Innovation and Industrial Dynamics” and project leader of the biannual M&A Report. Among the hardest hit was manufacturing, the automobile branch in particular. Due to decreased demand in China and the UK and the lingering effects of the diesel scandal, car sales have declined 17 per cent since January, which has had strong impact on M&A activity. “A decline in the automotive sector has a particularly strong impact on the M&A index,” concludes Niklas Dürr.