Private equity investors pumped more than €32bn into the German economy in 2019, more than in any year since the end of the financial crisis.
The surge was driven by a small number of “megadeals” such as KKR’s €4.9bn investment in media group Axel Springer and the €2.9bn bid by Hellman & Friedman for AutoScout24, the online car-trading platform.
According to a report by EY, the consultancy, total private equity investment in Europe’s largest economy rose 80 per cent year on year, from €17.9bn in 2018 to €32.2bn this year.
The number of deals slipped, however, from 229 to 219, suggesting that private equity groups are narrowing their focus on fewer, bigger transactions. There were eight deals worth more than €1bn in 2019, up from five in 2018 and four in 2017.
“Prices for companies and stakes in companies are at a very high level,” said Michael Kurz, head of private equity at EY for Germany, Austria and Switzerland.
“That is unlikely to change in the medium term, as there are not many high-calibre takeover targets on the market. If you want to strengthen your portfolio, you have to reach deep into your pocket.”
The biggest deal of the year in Germany — and the one that captured the headlines — was KKR’s June acquisition of a 44 per cent stake in Axel Springer, the owner of the Bild daily and a range of other media and publishing assets.
Mathias Döpfner, Axel Springer chief executive, said at the time that the new co-owners would allow the group to plan and invest for the long term rather than satisfy the short-term demands of the public market.
A majority stake in Axel Springer — which issued two profit warnings this year — will continue to be held by the widow and family of the founder, with a small participation by Mr Döpfner himself.
The second-biggest deal was the €3.5bn acquisition of Bayer’s Currenta, a chemical park operator, by Australian investment bank Macquarie.
Mr Kurz said he expected the surge in investment to continue into the new year. “There are a lot of sales currently under way that involve financial investors and that should be completed in the first half of 2020,” he said.
Private equity interest was likely to remain strong not least because of the increase in financial firepower, and the pressure to deploy that capital at a time of low interest rates.