Why Private Equity is Essential for the Future Viability of Germany as a Business Location (Deutsche Private Equity (DPE))

Summary

• By the end of 2029, around 545.000 medium-sized companies in Germany will be seeking a corporate succession solution.p.3
• Portfolio companies reinvest up to 25% more into their businesses than independent companies.p.3
• Employment in private equity portfolio companies grows by an average of 8% per year.p.3
• Between 2018 and 2024, private equity in Germany generated a 65% increase in revenue and a 63% growth in jobs across portfolio companies.p.6
• Germany invests only 0,219% of its GDP in private equity, ranking 12th in Europe.p.6
• Private equity-backed companies maintain a 19,7% lower profit payout ratio than independent companies during the three years following an IPO.p.12
• German small and medium-sized enterprises generate only 18,5% of extra-EU export value, while large companies account for 81,5%.p.18

Key insights

1. Employment growth in German private equity portfolio companies reached 8,0% between 2018 and 2021, compared to 1,3% for owner-managed businesses.p.6
2. A total of 569.000 business leaders in Germany plan to close their businesses rather than transfer ownership upon retirement.p.6
3. In Sweden, 15,2% of workers are employed by portfolio companies, backed by private equity investment intensity of 1,52% of GDP.p.7
4. Private equity investment volumes in Germany experienced a decline of 28,1% following their peak in 2021.p.10
5. Across all company revenue sizes, European private equity-backed firms maintain a median CAPEX of 2,7–3,2% of revenue versus 2,5–2,7% for independent companies.p.11
6. Securing a corporate succession leads to an average investment boost of 40% in affected companies.p.14
7. In the fourth quarter of 2024, private equity investors accounted for 25% of all corporate acquisitions in Sweden.p.15
8. Only 1,7% of German medium-sized companies executed direct investments abroad between 2019 and 2022.p.19
9. The volume of German federal regulatory text pages expanded by 107% in economic law and 88% in financial market regulation between 2010 and 2024.p.23