How can a savvy M&A advisor navigate the ultra-competitive merger market in Germany and the DACH region?
There’s no better person to ask than Kai Hesselmann, the co-founder and managing partner of DEALCIRCLE, a holistic tech solution that connects DACH-region M&A firms to more than 1 million potential buyers. Based in Hamburg, Hesselmann is a keen observer of the middle-market M&A business. He also hosts the CLOSE THE DEAL podcast, where he speaks to leading M&A experts.
As deal volume increases for the rest of the year, Hesselmann expects that some firms will be able to break out of the pack. The winners, he argues, will be those with the discipline to choose the right mandates while using technology to drive operational efficiency. The rest, in his view, will see their margins squeezed, caught between increasingly demanding clients and rising costs.
In connection with the publication of the DACH edition of the annual Firmex M&A Fee Guide, produced in partnership with DEALCIRCLE, we asked Hesselmann about the challenges faced by merger advisors in Germany, Austria, and Switzerland.
How healthy is the M&A business in the DACH region this year?
The performance of firms varies a lot. Some advisors are growing, especially those with niche focus, proprietary buyer access, or strong tech support. But overall, greater fee pressure, rising acquisition costs, lower deal certainty, and longer timelines are putting pressure on profitability. Especially in smaller transactions, margins are shrinking.
How would you describe the activity in the M&A market right now?
The market is recovering slowly after a weak 2023. Increased activity is being driven by small and mid-cap transactions, succession deals, carve-outs, and a return of strategic buyers and financial investors.
Does that mean that it’s getting easier for advisors to get deals done?
No. It’s harder than it used to be. The buyers are more selective, and deals take longer to close. Things are still getting slowed down by valuation gaps between buyers and sellers, difficulties arranging for financing, and increased due diligence.
What is the competitive environment like between firms?
The competition has intensified significantly. There are a lot of new boutique firms started by ex-bankers and corporate M&A professionals.
At the same time, clients expect more transparency, speed, and reach.
What is happening to advisory fees?
Fee levels are under pressure in the lower mid-market. Clients are more sensitive to fees and likely to try to negotiate them down, especially on the sell side.
Other clients – especially experienced buyers and professional sellers – push for low retainers and more emphasis on success-based fees. In some cases, they ask for success-only fees.
Even when firms are able to keep their absolute fee levels constant, their effective rate is often falling because of longer deal cycles and lower success rates.
Now, let’s turn to how firms can thrive in this environment. First, what can advisors do to respond to the increased competition?
Advisors need to be much more strategic in running their firms: they must pick the right business, specialize in certain sectors, actively seek larger mandates, and offer personal access to decision-makers.
On the operating side, they must actively manage their cost structure, build an efficient, scalable deal process, and use technology to speed up matching buyers with sellers.
How can firms respond to pressure to cut fees?
You can give in, but only if you see a clear path to a successful deal. If you want to maintain your fee levels, communicate your value clearly. Clients need to understand what they’re paying for – your process, reach, or data advantage.
Also, be flexible. Offer tiered success fees or performance-based bonuses. And stay transparent. Walk clients through your work and how it impacts outcomes. This builds trust and justifies your fee.
What are advisors doing to close more deals faster?
To improve closing rates, advisors are being careful to spend time only where it will drive success. That means pre-qualifying buyers more carefully and using data-driven matching instead of mass emailing. You only want to be dealing with people who are willing and able to close. And once you are in the deal process, use automation to streamline due diligence and negotiation so you can spend more personal time with the decision makers.
How would you sum up what it takes to succeed in today’s M&A market?
M&A firms that run on systems, not luck, are winning. Process automation, buyer intelligence, and smart technology give a clear edge.
Fee pressure is real, but advisors who create real value, work efficiently, and clearly differentiate themselves can still charge premium fees. The message is simple: Stop relying on Excel and gut feeling—start scaling with structure.
The Firmex Fee Guide DACH Edition, with commentary by Kai Hesselmann, provides an in-depth look at how merger advisors set fees and structure their engagement fees. Download a copy here.