Impending business successions, previously postponed divestments and strategic acquisition requirements point to a revival in the German M&A market in 2027. However, an increase in transaction activity does not inevitably lead to higher proceeds for sellers. The decisive factors remain the individual quality of earnings and the negotiating position of the respective company. If concrete steps to enhance value fail to materialise or operational risks rise, waiting further can significantly complicate the subsequent sales process.
According to Klaus Wagner, founder and Managing Partner at ox8 Corporate Finance, the mere hope of a recovery is not enough. Current market data already shows a noticeable discrepancy between aspiration and reality: in 55 per cent of sales processes, surveyed M&A advisers categorised sellers' price expectations as excessive. The average deviation from realistic market value in these cases stood at 28 per cent. In 32 per cent of instances, this valuation gap led to the final termination of negotiations.
Valuation gaps and contractual structures
To bridge differing expectations regarding future earnings development, parties frequently resort to earn-out arrangements. Under these mechanisms, a portion of the purchase price is tied to targets to be achieved after the sale. As Wagner emphasises, a high headline total can obscure how much of the sum is actually guaranteed upon completion. Alongside the sheer size of the order book, buyers therefore examine contract durations, existing barriers to switching, and the extent to which customer relationships are anchored to the organisation or directly to the owner.
- —Robustness and duration of existing customer contracts
- —Independence of business operations from the person of the owner
- —Verifiable margins and earnings quality within the order backlog
- —Concrete investment needs in IT systems and sales
Risks from investment backlogs and delays
In the technology sector as well, the resilience of the business model is the primary factor determining enterprise value. Buyers differentiate strictly between business-critical services with recurring revenue and project-based assignments that can be deferred when budgets are tight. Additional strategic interest can emerge if a business offers specialised expertise that is difficult to replicate, or technologies that deliver immediate benefits, such as reducing energy costs, provided that this knowledge is not tied to individuals.
Those who postpone a sale also risk painful deductions owing to accumulated investment backlogs. Prospective purchasers factor expenditure for outdated ERP systems, gaps in cybersecurity, pending machinery replacements, missing certifications or an understaffed sales organisation directly into their offers. Wagner warns against letting a stable negotiating window pass unused: if falling margins, the loss of key clients or substantial capital expenditure emerge on the horizon, another year of waiting can ultimately prove more costly than an earlier exit.
