Acquisition Landscape Comparison: US vs. Germany

October 19, 2023

by a searcher in Berlin, Deutschland

Hi team,

Looking to delve deeper into an international acquisition perspective. Specifically, I'm interested in understanding and comparing the acquisition landscape of the US (my partner is US-American) vs. Germany (I'm from South Germany). Even one-sided perspectives on either country and comparing them afterward would be extremely helpful.

I'd love to hear your thoughts on the following categories (also open for a call to delve deeper):

Price-Value-Ratio: How do the valuations of businesses compare? Differences in multiples, deal structures, or other financial metrics?

Growth Potential: Where are better growth opportunities? Market saturation?

Innovation Potential: Where is more room for innovation? Digitization? Modernization?

Operational Excellency Potential: Streamlining and optimizing processes post-acquisition, which market offers more opportunities/willingness/openness?

Cultural and Regulatory Differences: Are there significant cultural or regulatory barriers when it comes to acquiring and operating businesses in Germany as compared to the US?

Economic & Energy Stability: Given the ongoing energy crisis in Germany, are there any crises of this magnitude in the US that one should be cognizant of when considering an acquisition? Are any other market trends or geopolitical factors affecting the landscape?

Employee Availability: We're aware of the skilled labor shortages in various sectors. How does the availability of skilled employees compare between the US and Germany?

For those who have navigated the acquisition waters in both or either country, your first-hand experiences would be invaluable. And for others who have insights or opinions on this topic, I appreciate you sharing your thoughts as well.

Thanks in advance for sharing your insights!

Stay curious and keep searching!

#USvsGermany #acquisitions #internationalperspective #searchfunder

Reply by a searcher
from WU Vienna University of Economics and Business in Munich, Germany

Understanding company valuations can be complex because it varies depending on the metrics you're looking at, like EBITDA, EBIT, Free Cash Flow, or SDE. Each has its own range. Here's an example with EBIT multiples, often used by brokers to value companies i Germany. However, I find these multiples not very useful because they mix data from both large and small company deals. Still, it's a start. Check it out (in German) https://www.dub.de/unternehmenswert-berechnen/kmu-multiples/. Remember, while price is negotiable, the terms of a deal are more important. Banks also consider the Five Cs of Credit: Character, Capacity, Capital, Collateral, and Conditions when evaluating deals.

Reply by a searcher
from Universität Mannheim in Hamburg, Deutschland

Hi Franziska, what I find interesting is that valuations in Germany seem to be higher than in other parts of Europe or the USA.
Comparison between DACH and other European countries: https://insights.dealsuite.com/de/blog/ma-monitor-august-2023. As per the report, average EBITDA multiple for SMEs in Germany is 5.5x, whereas 3-5x EBITDA multiple is frequently cited for SMEs in the US. I would be interested to find out why this is the case.

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