KfW Research: Domestic investors reticent to acquire German SMEs

• Number of mergers and acquisitions of SMEs in Germany remains low post-COVID
• Domestic investors appear particularly cautious
• Growing interest in IT companies

Small and medium-sized enterprises (SMEs) in Germany are significantly less often the target of mergers and acquisitions (M&A) than they were only a few years ago. The number of M&A transactions between 2020 and 2023 involving businesses in this segment was some 35% below the pre-COVID rate. While a peak of about 1,300 M&A deals was recorded in the SME sector in 2017, this figure fell to only 760 in 2021 during the COVID-19 crisis. The level of activities has remained low since then.

These are the findings of a study of the M&A market for small and medium-sized enterprises conducted recently by KfW Research on the basis of Moody’s Orbis M&A database.

Whereas previously the acquirer in most M&A transactions involving German SMEs was a domestic business, this has ceased to be the case since the COVID-19 crisis. Between 2020 and 2023 German acquirers accounted for only 51% of transactions, down from 61% over the period 2005 to 2019.

Businesses from other European countries are particularly interested in German SMEs. They are the acquirers in 30% of all deals (up from 25% before the COVID-19 pandemic). The UK heads the list, accounting for 4.9% followed by Sweden in 3.8% of cases. Investors from the USA still make up the lion’s share of transactions, however. Between 2020 and 2023 they were responsible for around 9.4% of M&A deals in the SME segment.

German manufacturing companies attract the greatest interest. 33.4% of M&A deals involve these businesses, followed by ICT businesses, which account for 27.6% of transactions. That is very much higher than the share of SMEs accounted for by these companies, which is still under 6%. Interest in ICT companies has risen significantly. Between 2005 and 2019 only 18.6% of M&A transactions targeted an ICT business.

Chinese investors are more focused on a specific industry than investors from any other country. Almost seven deals in ten concluded by Chinese acquirers in the German SME segment targeted manufacturing companies, primarily mechanical engineering businesses, manufacturers of vehicles and vehicle parts, and manufacturers of metal products.

“Current global developments and trends are demanding that many companies embark on strategic changes, which can be radical for some. Acquisitions, stake holdings or mergers with other companies can help businesses transition,”

explained Dr Juliane Gerstenberger, Senior Economist at KfW.

“Since the COVID-19 crisis, however, we have seen a significant drop in the percentage of M&A transactions involving German SMEs, where a German company is the acquirer.”

The study by KfW Research is available at

M&A deals in the German SME sector - Covid shock not yet overcome(PDF, 258 KB, accessible) (in german)