German M&A Trends in Industrials & Services

Automotive

As we anticipated in our outlook, the German Automotive sub-sector is facing difficult market conditions: year-to-date deals are 46% down compared to the same period in 2024. Global uncertainty and growing competition from Asian OEMs and suppliers, combined with ongoing transformation, weighed heavily on the sub-sector and thus on M&A in the first half of 2025. On the other hand, as predicted, investors with a focus on business turnarounds and restructurings are increasingly finding suitable assets and seizing the opportunity to buy them – Mutares’s acquisition of NBHX Trim Europe and Magirus are prime examples. We have also seen strategic investors acquiring distressed assets, such as Porsche’s acquisition of V4DRIVE from Varta. In light of the current state of the sub-sector, we expect to see further deals in this space.

We predicted that German automotive companies would continue to identify and dispose of non-core assets to free up capital to invest in core assets. We continue to see this strategy being implemented; recent examples include Continental’s plans to spin off its Automotive group sector and sell its ContiTech group, and Lyft’s acquisition of the Mercedes-BMW joint venture FREENOW. The latter also highlights the fact that there is still strong demand among automotive companies for acquiring or investing in CASE (connected, automated, shared and electric) assets. Further examples include Volkswagen’s investment in Forge Nano, a manufacturer of nanomaterial coatings for lithium-ion batteries and catalyst applications, or ZF’s investment in Qorix, a provider of middleware solutions. We expect to see more such deals going forward; OEMs creating joint ventures to split development costs is just one of the potential benefits.

Excess vehicle production capacity, with correspondingly low levels of utilisation in some factories, is another concern for automotive companies in Germany and Europe as a whole. This may open up opportunities for these factories to change hands in asset deals – potentially being acquired by other OEMs looking to establish or expand a production footprint in the region. Alternatively, these factories could be repurposed for the defence industry to satisfy the demand stemming from increased military spending. We expect that there will only be a limited number of such deals, but, if completed, they will be among the largest in terms of deal value.

Overall, we expect the current difficult M&A environment to persist in the Automotive sub-sector for the remainder of the year, although assets vital for transformation and CASE assets will continue to attract significant investor interest.

Business Services

The German Business Services sub-sector saw stable deal activity in the first half of 2025, with an 1% increase in the number of deals compared to the same period in 2024. Dealmaking was dominated by financial investors (52%), mainly from Germany (45%).

As anticipated, professional services firms continued to attract investor interest, and they represented by far the most active space for M&A within the Business Services sub-sector. Management consulting and other consulting firms were a particular focus for investors, such as Eurazeo acquiring a majority stake in OMMAX and Investcorp acquiring a majority stake in Miebach. We also saw investments in accounting and tax services firms, such as EQT acquiring WTS Group. Looking ahead, we expect this trend to continue: professional services firms have a more attractive and less capital-intensive business model than many others, and the fragmented professional services market is ripe for buy-and-build strategies. This is exemplified by Equistone-owned Timetoact acquiring beBOLD, or Ice Lake Capital acquiring and merging q-holding and NEXTRAIL. However, investors are also raising concerns around key personnel risks, demanding thorough new forms of due diligence and broad management equity plans to align financial interests among all parties involved.

The industrial services space also saw a steady flow of deals, such as Hannover Finanz’s investment in cybersecurity services firm 8com. As companies continue to increase their focus on physical and digital security, these assets should continue to be attractive targets for acquisition. We have also seen what will probably be 2025’s most valuable industrial services transaction: the acquisition of Apleona by a consortium led by Bain Capital.

Waste management and especially recycling are becoming increasingly important for both environmental and economic reasons. Accordingly, we have seen an increase in deals in this area, such as the acquisitions of Karl Meyer and Hagemann Recycling and the investment in Radical Dot by an investor group.

Talent and educational companies are another area where we are seeing a continuous stream of deals, such as Naxicap Partners acquiring Tomorrow Education Group, Funke Mediengruppe acquiring Everbay, or an investor group investing in ubiLearning Solutions. Against the backdrop of increasing labour shortages and the transformation of job profiles, we expect to see further M&A in this area.

In the second half of this year, we expect that Business Services assets will remain attractive targets for strategic and financial investors alike.

Engineering and Construction

The first half of 2025 was a positive period for dealmaking in the German Engineering & Construction (E&C) sub-sector. The number of deals increased by approximately 6% compared to 2024. As in previous years, most of the buyers (71%) were corporates; the sub-sector’s low margins make it less appealing to PE investors. Buyers from the German-speaking countries dominated (67%), of which 91% were from Germany.  

A bright spot for M&A in the E&C sub-sector so far in 2025 has been the construction market, along with civil engineering. Within construction, acquisitions were primarily focused on plumbing, heating and air-conditioning contractors. Notable transactions included Vaventus’s add-on acquisitions of Hermann Popko and MP Networx. There was also strong demand in construction companies specialising in commercial and institutional buildings. Meanwhile, dealmaking in civil engineering was dominated by engineering services companies, owing to their capital-light business models. Notable transactions included Acardis’s complementary acquisitions of KUA Group, a firm working in complex data centre design, and WSP Infrastructure Engineering, an engineering firm specialising in rail infrastructure, signalling, structural engineering and software development. Looking ahead, engineering firms focused on rail infrastructure are poised for significant growth. Germany’s national rail operator Deutsche Bahn has identified a need for up to €150 billion by 2034 to modernise the rail network, highlighting the demand for advanced engineering solutions in this area. This anticipated surge in investment is likely to spur deal activity as companies seek to expand their capabilities and market presence.

With the growing focus on environmental and social responsibility, investors in E&C are increasingly focusing on sustainable initiatives. This trend is evident in Citaglobal’s acquisition of a 55% stake in LAWI Engineering, aimed at delivering advanced waste-to-energy technology and engineering solutions for waste management projects.

Looking forward to the rest of the year, the German government’s new €500 billion infrastructure fund is expected to significantly boost demand, leading to increased dealmaking in the sub-sector over the coming years. This long-term funding settlement creates stability for planning, which may motivate companies to invest strategically in expanding their capabilities. We also expect strategic deals focused on technology, ESG and technical capabilities to remain at the top of the agenda for E&C companies.

Industrial Manufacturing

Dealmaking in the German Industrial Manufacturing sub-sector experienced a difficult start to the year, with the number of deals decreasing by 5% compared to the same period in 2024. Despite this modest decline, Industrial Manufacturing remains the most active sub-sector for M&A in Germany. Unlike many other I&S sub-sectors, financial investors were the dominant buyers, accounting for 53% of the transactions; 56% of these investors were based in Germany.

Acquisitions within the industrial machinery space were a major driver of M&A during this period. We also saw the return of large deals in this space, such as Samsung Electronics’ €1.5 billion acquisition of FläktGroup, an international provider of HVAC solutions, from Triton. Rieter’s strategic acquisition of Barmag, a provider of filament spinning systems used for manufacturing artificial fibres, exemplifies how companies are seeking to expand and enhance their product portfolios by incorporating specialised technologies.

Similarly, dealmaking remained steady in the German electronic and electrical equipment industry, reflecting the broader trend of stability in the industrial landscape. A notable transaction in this space was Dover Corporation’s acquisition of Sikora AG, a provider of measuring and control technology. Electronics and electrical equipment also saw more involvement of private equity than any other area of Industrial Manufacturing: examples included 3i’s investment in OMS Prüfservice, a tech-enabled service provider for testing electrical systems and equipment, and Callista Private Equity’s acquisition of Newston Automated Solutions, which specialises in developing and installing automated inline measurement systems in automotive OEM production lines. The Callista Private Equity acquisition exemplifies the ongoing interest in industrial automation and Industry 4.0 technologies, as does KKR’s acquisition of a minority stake in ifm electronic.

We also continue to see interest in manufacturing processes and assets that are driving the shift towards greater sustainability and energy efficiency, as demonstrated by Vytal Global, a provider of smart reusable packaging solutions, which successfully raised €14 million in growth funding.

For the second half of the year, we anticipate that Industrial Manufacturing assets will continue to attract interest from both strategic and financial investors, with dealmaking expected to increase over the rest of 2025.