Private equity sponsors have been very active in Germany over the past few years. In 2003, approximately 20% of all European private equity investments were made in Germany. While this is only half of what was invested in the UK, it is approximately twice the figure for France. At the end of 2003, private equity houses that are members of the German Private Equity and Venture Capital Association (BVK) held investments of more than € 18bn (£12bn) in 5,000 smaller and medium-sized companies in Germany (according to the BVK). In fact, the German M&A market has been dominated by private equity transactions in recent years.
There is a perception among some non-German private equity houses, however, that the complex German regulatory environment makes investments more expensive and depresses returns. This perception appears to be contradicted by the actual activities of private equity firms in Germany – particularly non-German firms. While some rules that apply to investments and businesses in Germany are indeed complex – and, when it comes to taxes, sometimes even unpredictable – they can be overcome with good legal advice regarding the structuring of transactions and the running of the business.
