German private equity market's e600bn boost
The German private equity market will receive an injection of some e600bn from next January on the back of tax reforms that will abolish capital gains tax (CGT), according to a new report by Commerzbank Securities.
Commerzbank says the abolition of CGT will result in the demerger of non-core assets from German corporations – particularly in the financial sector - as large financial groups such as Allianz and Deutsche Bank sell their industrial stakes.
Cross holdings are also expected to be hived off, while a slew of takeovers of German conglomerates is further predicted.
Such market activity, the research says, will lead to the transformation of around 1,000 unincorporated businesses into corporates.
Of the e600bn estimated market flow, Commerzbank believes no more than e100bn will be deals with a size more than e1bn.
Consequently, the bank notes that this will lead to a large number of small deals with the main beneficiaries being private equity groups and the accompanying advisory boutiques.