"Insolvencies will not rise significantly again until the end of 2021"

In the wake of the Covid 19 pandemic, the term distressed M&A has increasingly come into focus. With the prevailing uncertainty, companies are increasingly getting into trouble and the risk of insolvency is rising. Under normal conditions, anyway. We spoke to Carina Küffen of Saxenhammer & Co. about her assessment of current developments in the distressed M&A market.

Unternehmeredition / 2021.04.28

Unternehmeredition: How is the market for distressed M&A developing?

Carina Küffen: Due to the pandemic, the topic is currently very present in the media. However, I would describe the market as rather quiet at the moment. There is no sign of a wave of insolvencies. There are various reasons for this: Even in the period before Corona, companies were able to obtain money cheaply thanks to low interest rates on loans and were able to build up a cushion. Thanks to government aid, short-time working allowances and other measures such as the suspension of the obligation to file for insolvency, the number of insolvencies has even fallen significantly recently. While there were still 18,700 corporate insolvencies in Germany in 2019, the number fell to 15,800 in 2020. In the current year, I estimate the decline will be another 50%.

Then the development here is different than in the classic M&A market. Because here the cases have been rising again significantly since the end of last year and the beginning of this year.

That is correct. But I assume that the situation will change towards the middle/end of this year – when the obligation to file for insolvency applies again and the aid programs gradually expire – and the number of transactions will also pick up again in the distressed area. What we currently have is an artificially created, unnatural situation. A functioning market economy needs insolvencies.

Read the full interview here.


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