By Emma-Victoria Farr and Alexander Hübner

(Reuters) – Germany’s first quarter of 2022 saw a drop of 10% in mergers and acquisitions compared to 2021. This is the slowest year start since 2016, due to uncertainty in markets caused by Russia’s invasion in Ukraine.

According to Refinitiv data, equity capital markets have suffered more from market jitters. There have been no initial public offerings or convertible offerings in this euro area’s largest economy.

Armin von Fakenhayn, Head of Corporate and Investment Banking at Bank of America in Germany and Austria (NYSE:), stated that it is highly unlikely that any companies would list their businesses before Easter. This is despite the current market conditions.

German equity capital markets only raised $1 billion this year, a drop of 88% from the first quarter in 2021.

But appetite for M&A deals remains strong even if boardrooms have become more risk-averse.

“Unlike at the beginning of the coronavirus crisis, the M&A market has definitely not come to a standstill and projects are continuing. But parties are examining very carefully how the conflict may affect each company,” said Tibor Kossa, co-head of German and Austrian M&A at Goldman Sachs (NYSE:).

Even though the Ukraine crisis has impacted only 1-2% German sales, Berthold Mueller (chair of DACH Investment Banking at Jefferies) said, “The war and its longer-term implications absorb a lot management capacity.”

However, despite the general caution about starting new processes during wartime, auctions launched prior to the conflict managed to reach the end.

One such example was Siemens’ $1.3 billion carve-out of its mail and parcel logistics business, which was sold to Hamburg-based Koerber in February and led to consumer products and services accounting for one-third of German target M&A in the first quarter.

Other deals in the technology sector contributed to 31% of German target M&A including the purchase by Italian infrastructure and transport services firm Atlantia of Siemens’ traffic software solutions business, Yunex.

The strong growth of the technology sector led to an increase at mid-market deals activity, which reached their highest levels since 2015 according to Refinitiv data.

“Private equity remains open to acquisitions and transactions can continue to be funded,” said Christopher Droege, co-head of German and Austrian M&A at Goldman Sachs.

TRANSATLANTIC TIE UPS – EYES

One sector that seems resilient to the backdrop of war is telecommunications – arguably a necessity for information flow in times of crisis.

Deutsche Telekom (OTC-) has launched the sale its towers business. It is currently collecting indicative offer together with Goldman Sachs. This deal could bring the business to close to 18 Billion Euros ($19.86B).

According to dealmakers, there is intense communication with both corporate clients and private equity. The pipeline of deals for the remainder of the year appears intact.

Transatlantic partnerships could grow as Europe becomes more complex.

Kossa of Goldman Sachs said that German takeover-seeking companies will be more inclined to look towards North America in the future, as the gap between Europe’s growth and America is expected to grow further.

For some, however, it is difficult to swallow the idea of making deals in wartime for those who prefer to wait until peacetime.

The buyer must not appear before their board and pretend the war is over. How long will this situation last? According to Jefferies, Mueller: “Companies tend to wait until this situation improves.”

($1 = 0.9061 euros)