Luxembourg – Set for a rebound?

The Luxembourg M&A market has evolved in recent years, influenced by both global trends and unique factors related to Luxembourg’s role as a financial hub and an attractive jurisdiction for cross-border transactions, particularly due to its tax efficiency, political stability, and position within the EU. 

However, activity has slowed over the past three years and 2024 ended with a similar deal value to 2023 but saw fewer transactions taking place across domestic and cross-border deals. Below, we consider the key trends that have emerged in Luxembourg’s 2024 M&A landscape and explain why 2025 could be a better year for deals.

Increased interest from private equity (PE) firms and for venture capital (VC) transactions

PE firms have been focusing on mid-market investments, particularly in the technology, real estate (mainly REITs and logistics) and industrial sectors. Meanwhile, in VC transactions, innovation continues to drive high returns in sectors such as fintech, health-tech and digitisation. Overall, Luxembourg has seen increased interest in VC, especially towards early-stage tech companies.

Inbound and outbound M&A activity

Firstly, many buyers from the US and Asia have targeted strategic transactions involving Luxembourg vehicles holding energy, infrastructure or TMT-related assets. Elsewhere, European consolidation means Luxembourg has also experienced inbound M&A from other European countries, primarily in the financial services, banking and asset management sectors. Meanwhile, the number of outbound M&A deals has remained low compared to previous years, but the value of these deals has reached its highest level in the past decade.

Environmental, social and governance (ESG) and foreign direct investment (FDI) considerations

In line with global trends, there has been a growing emphasis on ESG factors in M&A transactions involving Luxembourg companies. This trend is driven by regulatory changes and investor pressure, with buyers increasingly incorporating ESG considerations into their due diligence processes (as we discuss here). Sustainable finance is becoming a key focus.

Meanwhile, the introduction of an FDI regime in Luxembourg's legal environment may slow down certain transactions, as both the private and public sectors undergo a learning curve and gain experience when dealing with this new regime.

Restructuring and distressed M&A

Distressed M&A activity has increased following the Covid-19 pandemic, with companies facing financial difficulties seeking restructuring, often through asset sales or corporate carve-outs. Several PE firms have had to take control of assets due to defaults by their owners.

Moreover, large corporations and financial institutions have been increasingly divesting non-core assets. Luxembourg has seen a surge in deals where such assets are sold (for example via a universal transfer of assets and liabilities) to PE firms or international buyers.

What to expect for 2025?

The pressure from investors on PE firms to deploy uncommitted capital, combined with the ongoing consolidation trend in European industries post-pandemic, is likely to drive more M&A deals. Meanwhile, as seen in 2024, the Luxembourg M&A market in 2025 is expected to increasingly focus on ESG-compliant, technology-driven transactions led by PE firms. 

Overall a rebound in M&A activity is anticipated, taking place within a more sophisticated and diverse landscape driven by advances in technology, shifts in investor preferences and regulatory changes at both the European and national levels. One should also note that the ongoing decline in interest rates on EUR debt may also have an impact on leveraged buyouts and on real estate transactions.