The M&A rebound remains selective

The recovery in the M&A market is real — but it is uneven. Whilst transaction activity and fundamentals are improving across the German mid-market, sentiment, exit markets and fundraising remain subdued in parts of the industry. For investors, this does not translate into a broad-based recovery, but rather a market in which selectivity becomes the decisive differentiating factor.

The current mid-market picture is therefore contradictory, but by no means negative. The Midmarket Private Equity Monitor, authored by FINANCE in collaboration with DBAG, describes a market in which operational conditions are improving whilst the question of capital distributions to investors is moving further into focus. In fundraising in particular, the credibility of a liquidity and exit story over the next 12 to 18 months is gaining in importance.

This environment also changes the way new investments are assessed. Improved deal flow alone is insufficient when financing terms, holding periods and exit routes are being scrutinised more carefully than they were during the low-interest-rate era. The result is that investors favour transactions with a clear value creation agenda, a realistic capital structure and a business model that not only accommodates operational improvement but actively supports it.

In the mid-market, this dynamic can itself become an advantage. Where uncertainty dampens broad-based competition, disciplined investors find improved conditions for attractive entry points. Acting counter-cyclically in this environment does not mean investing against the market — it means distinguishing rigorously between prevailing sentiment and underlying fundamentals.

2026 is therefore likely to be less a year of broad-based exuberance than one of well-founded decision-making. Those who act with a clear sector focus, robust due diligence and a genuine operational perspective will find conditions in this market very favourable — particularly because the recovery is not arriving everywhere at once.