Private equity-backed deal activity in DACH region remains strong

03 June 2019 3 min. read

The number of private equity-backed deals in the DACH region – Germany, Austria and Switzerland – has reached its highest point since the turn of the century, finds a new report.

Analysis by the Private Equity practice of management consulting firm Roland Berger shows that deal activity in the sector remained strong in 2018, despite unfavourable developments in macroeconomic indicators across the region and Europe.

Demonstrating the rise of private equity as a dealmaking force, 40 deals were closed in 2001 by financial sponsors, compared to last year’s 205 deals. The most active players in DACH last year included Waterland Private Equity Investments, accounting for seven deals, followed by Afinum and Auctus Capital Partners with six deals respectively. H.I.G. Capital and Triton Partners recorded five deals each, while Aurelius and Nordic Capital managed to close four deals each.

DACH region deal flow for 2001 until 2018

The region’s deal activity was well spread out throughout the year, with Q1 and Q4 recording the highest level of activity. While the number of current deals peaked in the summer months, the number of deals closed last year peaked in the last quarter. Total deal flow was continuously strong in 2018, with 498 deals compared to 464 deals in 2017.

Private equity’s strong year can be explained by a number of factors. Strong demand from institutional investors to capture returns on investment that are above currently low interest rates means that money is flocking to private equity firms. Meanwhile, the past years have seen a start-up boom, meaning that there is a well-developed base of quality targets seeking venture capital or growth capital.

Amid a digital-led disruptive environment, opportunities in all sectors are opening up, so inorganic growth as a whole is also gaining ground, offering acquirers effective means to boost portfolios with new skills, capabilities or talent. Illustrating the good market, a recent report by PwC found that Europe’s private equity market is at its highest level in decade, both in terms of volume and value.

Deals by month in DACH region by industry

From a sector perspective, DACH based private equity firms were most interested in in the Engineered Products and Consumer Goods sectors (151 and 90 deals respectively), followed by IT/Telecommunication and Healthcare with 60 and 54 deals. Further, Automotive recorded a very solid level of deal activity with 53 deals, while the Transportation, Chemicals and Energy industries showed a more moderate deal flow.

Going forward, the researchers at Roland Berger highlight that while both private equity and merger & acquisition fundamentals remain strong, geo-political developments may impact deal-making sentiment. “Growing political worries and related implications for the global economy are creating a few clouds on the horizon.”

The consultants point at among others the US-China trade wars, the ongoing uncertainty about Brexit, the more recent development in Italy, and Germany’s own political situation which is seeing Merkel’s CDU lose some of its grip on the German political landscape.

Related: Global merger & acquisition deal value spikes to $3.4 trillion.