Consulting firm Ernst & Young has published a study showing that private equity firms have invested approximately €29.5 billion ($35.1 billion) in Germany in 2005, an increase of €6 billion over the prior year.
The E&Y report noted that most of the activity came from foreign private equity firms but a significant amount, approximately €500 million, was the result of investments by German firms in their home market.
The study also noted that over the past year private equity buyers have completed 17 “mega deals”, or transactions valued at over €500 million. The largest private equity deal in Germany last year was the sale of Viterra, the residential real estate arm of Germany utility E.on, to Terra Firma for €7 billion. Yet while the German real estate market received a significant amount of attention in 2005 – New York-based investment firm Fortress closed a €2 billion fund focused solely on the German residential market – there were some notable transactions in the corporate sector as well. In July, Doughty Hanson paid €1.1 billion to acquire a majority stake in German electrical company Moeller Group from Advent International. And in January, Apollo acquired Ish, a German cable company, for €1.6 billion – it later merged Ish with Iesy, also owned by Apollo, and Tele Columbus, owned by BC Partners, in a transaction that created a €3 billion entity.
All of this activity came as foreign private equity firms were trying to navigate a delicate political situation following remarks by SPD party chairman Franz Muntefering comparing private equity firms to “swarms of locusts”. At the same time, Germany, Europe’s largest economy, has been stagnating as job and GDP growth have been dismal. Nevertheless, the E&Y study predicts that private equity firms will continue to be attracted to Germany in 2006 and that a number of large-scale transactions are expected in the coming months.