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DAX/MDAX deal survey

Key market influences

There are, of course, a number of factors affecting the current M&A activities of Germany's largest companies but two stand out in particular: firstly, the digital transformation of companies, industries and society; and second, economic uncertainties caused by the current political environment.

The rush to digital transformation

Digital transformation via technologies such as artificial intelligence, robotics, big data, 3D printing and the digitisation of business processes are forcing established players to reshape their business models and accelerate their innovation efforts. Some of these businesses are innovating themselves; others are doing so by acquiring digital companies and their innovative teams.

Globally, the volume of digital acquisitions increased by 600 per cent between 2009 and 2017. This has been driven not only by companies upgrading their digital capabilities but also by a high level of interest in digital assets among financial investors. Easy access to capital provides a high degree of flexibility for companies to fund these transactions.

Many of the so-called 'mega deals' seen in the market are driven by consolidation of entire sectors, which is often the result of intensified competition and challenges from new competitors in emerging markets, as well as the introduction of disruptive technologies and business models.

We expect these trends to continue in the near term; we also continue to expect transformative deals such as spin-offs or IPOs of business units, joint ventures and other types of portfolio optimisations among large corporations.

A more uncertain deal environment

At the same time, geopolitical factors, such as trade disputes between the United States and Europe and China, and the effects of a possible Brexit, continue to have an impact on the European and global M&A markets.

Protectionist tendencies are also manifesting themselves with changes to the regulatory environment. For example, we are seeing more restrictive merger control reviews and tightening foreign investment regimes, particularly in the US, EU and individual European countries such as Germany, where regulators are looking more carefully at deals in innovative and strategically sensitive sectors. In some areas, these developments are making it much more difficult to plan and predict cross-border M&A opportunities, especially given that further changes to key regulatory regimes are expected in the coming months.

The resulting uncertainties are causing companies and investors to act more cautiously than in the past, and M&A opportunities will require even more careful preparation and a forward-looking assessment of regulatory risks.

The digital economy is proving to be an important driver for the M&A market. This momentum has so far remained largely stable in the face of the more difficult political environment. However, the more complex political and regulatory environment increasingly requires companies to carry out an even more comprehensive analysis and detailed planning of M&A activities in certain areas.

Lars Meyer