A survey by global law firm Freshfields Bruckhaus Deringer has analysed the M&A activity of the 40 DAX and 50 MDAX companies over the past 10 years, this time from 2013 to 2022. Looking at the year 2022 the survey found that the listed companies were more cautious recently, but quite active overall – despite the challenging political and economic environment and special effects from the pandemic. The key findings of the study include: While the number of acquisitions and investments by the current DAX and MDAX constituents increased almost steadily for nine years until 2021, the total was down 11.2 per cent in 2022 compared to 2021. The published deal values dropped by about 35 per cent, from $77.8bn in 2021 to $50.4bn in 2022. In percentage terms, these declines are about in line with the trend also observed globally last year, where the deal value was down 34 per cent from 2021. Looking at the sectors in which the DAX and MDAX companies acquire and invest, digital markets are now outpacing DAX and MDAX companies’ investments in other industries. The fact that very few of the DAX and MDAX constituents are pure tech companies further underscores the fact that M&A continues to be an important tool for leading German corporates to implement their digital transformation. Similarly, some of the economies with a high density of companies in innovative areas like tech and life sciences have also seen a steep rise in M&A investments from Germany‘s largest listed companies – for example, Israel saw 41 deals by DAX and MDAX companies in the three years 2020, 2021 and 2022 , but only nine deals between in the seven prior years (2013 and 2019). Looking at the DAX and MDAX together, Germany has continued to be the top investment destination over the last decade (677 deals), even if almost on par with the US (604 deals). In fact, when looking at the DAX companies only, the US has become the top investment destination in the last decade, having already overtaken domestic German transactions in 2016, with the MDAX constituents also seeing the US as an increasingly popular destination. The study also shows that leading German companies continue to seek inorganic growth in China. China has remained attractive for DAX companies in particular, with activity increasing since a drop in 2016. Combined volumes from 2020 to 2022 account for more than the half of all German-China deals in the last decade. Within emerging markets, deals by the DAX and MDAX constituents had been on the rise since 2018, though activity appears to have tailed off in accordance with the overall trends in 2022 (18 per cent down year-on-year between 2021 and 2022). Deals by both DAX and MDAX companies in Russia have been declining since 2017 and have come to a standstill since the start of the war against Ukraine. Decline in deals mirrors global trend The past year has seen widespread and unexpected global economic upheaval, which in turn has affected the M&A market globally and in Germany. After recent record years, both the volume and the value of global transactions declined: in 2022 value was $3.855trn, down 34 per cent from 2021, as the latest Freshfields M&A monitor shows as well. The number of transactions decreased by 29 percent in 2022 compared to 2021. This trend also applies to the 90 leading German companies that are listed in the DAX and the MDAX. “M&A activity among the DAX and MDAX companies was still fairly active strong in 2022 despite the global transactional landscape being down significantly and despite the ‘polycrisis’ of war in Ukraine, higher interest rates, rising inflation and other dampening factors,” says Lars Meyer, M&A partner at Freshfields and one of the authors of the study. “Moreover, 2021 was a year in which the investment backlog from the coronavirus-affected year of 2020 was released again. This made the year artificially stronger and limits the comparison with 2022.” Tech, ESG and the US remain drivers of German M&A The largest listed companies in Germany are also using M&A to advance their efforts to increase sustainability, for example to acquire clean energy technology. Accordingly, ESG and in particular the shift away from carbon-intensive business models will continue to become more significant factors in M&A. In addition, the digital transformation of the German industry also remains a very significant driver of M&A of DAX and MDAX companies. Freshfields M&A partner Philipp Puetz says: “The figures highlight the push towards digital transformation of German companies and the desire to undertake tech deals globally. Many companies of the ‘old economy’ are still in the midst of this process and emerging tech companies may renew attraction for M&A activity in 2023 on a more moderate valuation level. In addition, advanced technologies around AI, automation and the metaverse may further disrupt traditional industries and attract investments, not only from pure tech players.” The large number of potential takeover or investment targets in the tech sector is also a main reason for their focus on deals the US, but not the only one: “German companies on the DAX and MDAX are increasingly looking to the US market, in particular with a focus on acquisitions and investments in innovative industries,” says M&A Partner Elizabeth Oberholzer. “In addition, the US have the advantages of a more stable environment and energy supply certainty for plants while this is currently a challenge in Europe.” The entire survey and individual statistics can be found here. It includes all figures and individual statistics on deal volume and deal numbers, sectors and regions (with additional evaluation for the emerging markets) as well as a description of the underlying methodology.