German Economy Faces Corporate Decline Amid Record Bankruptcies and Surge in Big M&A Deals in 2025

Germany's economic landscape in 2025 has been marked by significant corporate challenges alongside a surge in mergers and acquisitions. According to a report from the Frankfurter Rundschau, Germany's top 100 companies experienced a modest revenue increase of 0.6% to about €1.55 trillion, but their pre-tax profits plunged by 15%, totaling €102 billion. The automotive sector was particularly hard hit, with giants like Volkswagen, BMW, and Mercedes-Benz seeing profits fall by 46% despite only a slight 2% revenue decline. The chemical industry faced an even steeper 71% profit drop.

Meanwhile, the national insolvency rate has skyrocketed, reaching a record 21,812 corporate bankruptcies in 2024. By August 2025, insolvencies had risen 12.2% year-on-year, especially impacting sectors such as transportation, logistics, construction, and hospitality. Since 2023, around 100,000 jobs have vanished nationwide with 17,500 losses reported among the top companies in 2025 alone. Volkswagen alone plans to cut 35,000 jobs by 2030.

Amid this tough economic climate, Capital reports a notable boom in German mergers and acquisitions (M&A), with 1,641 German companies sold for $107.1 billion by mid-December 2025—a 30% increase over 2024. Financial investors doubled their acquisitions to $49.9 billion, targeting German firms mostly domestically since German companies remained modest in foreign takeovers. The largest transactions included the sale of pharmaceuticals leader Stada for $11.7 billion to a Capvest-led consortium, the spin-off of Siemens Energy India for $11.3 billion, and a 46% stake sale in Tennet for $11.2 billion. The total M&A deal volume hit $167.5 billion, up 17% though transaction count dropped to the lowest since 2020. Goldman Sachs led as the top M&A advisor in Germany.

Structural issues such as soaring energy costs and rigid bureaucracy are contributing to the deteriorating business environment, deterring investments. Industry associations foresee more job cuts in 2026, despite some cautious optimism fueled by sectors linked to defense spending and infrastructure investment.

This mixed picture depicts a German economy under immense pressure but also undergoing transformation through significant merger activities, signaling both systemic challenges and potential areas of recovery.