By Dr. Tobias Larisch and Dr. Jana Dammann de Chapto

The energy and infrastructure sectors continue to experience transformative changes at a high pace, a trend that Latham expects to sustain momentum for the foreseeable future.

Energy Sector

The global mega-trend of decarbonization had repercussions in Germany in 2020, most prominently displayed by the “Coal Exit”. In July 2020, the German federal government passed legislation to end coal-fired power generation in Germany by 2038, and a decommissioning schedule for individual lignite power plants was agreed. For utilities, the legislation entailed challenging negotiations with the German federal government to reach agreement on the terms of this phase-out (previously covered in this Latham post). The Coal Exit will likely continue to accelerate the energy transition, with an ever-increasing share of renewables in the overall energy mix.

In 2020, hydrogen became the energy buzzword given its potentially key role in the global push to produce carbon-free energy. A wholesale shift to clean hydrogen could remove carbon from the electricity system, which is currently responsible for around a quarter of the world’s annual 33 gigatonnes of carbon dioxide emissions. A hydrogen shift could also help clean up transport and heavy industry, which account for the bulk of other global emissions. However, the opportunities around hydrogen would also require coordinated policy, lower hydrogen production costs, and massive growth of renewable energy source.

Digital Infrastructure

Despite COVID-19 and the economic downturn, private investment in Germany’s digital infrastructure sector has continued apace. Private investments into fibre businesses have particularly accelerated this year, contributing to the German federal government’s plan to provide nationwide gigabit convergent internet infrastructure by 2025. Two transactions specifically stood out this year in this regard:

  • Telefónica and Allianz Capital Partners created a joint venture to deploy fibre in Germany through an open wholesale company. The €5 billion deal will help connect more than 2 million homes in rural and semi-rural areas, creating a fibre network of over 50,000 km. This broad network will deliver environmental benefits through energy efficient operations while enabling the transition to fibre in across large rural areas of Germany. Latham has advised Allianz Capital Partners comprehensively on this major project.
  • Latham’s clients EQT and OMERS acquired Deutsche Glasfaser, one of the fastest-growing providers of gigabit internet connections through fiber-to-the-home (FTTH), which currently covers more than 600,000 households and 5,000 businesses across Germany. Deutsche Glasfaser will be combined with EQT Infrastructure IV portfolio company inexio to form a leading FttH player in rural Germany.

Social Infrastructure

In 2020, Latham saw continued high interest by private equity funds and strategic investors in the German healthcare sector (including hospitals and healthcare services companies). The deals that stood out last year were:

  • The merger of Latham’s client Rhön-Klinikum with Asklepios Kliniken to create the second largest private hospital operator in Germany. The €1.3 billion deal is regarded as one of the largest M&A deals in the healthcare sector of 2019/2020.
  • The US$1.8 billion merger of Latham’s consortium clients Astorg, Nordic Capital, and Novo with Bioclinica, a technological and scientific leader in clinical imaging and portfolio company of Cinven.
  • Investment by Latham’s client Temasek in BioNTech, a Germany-based clinical-stage biotechnology company focused on patient-specific immunotherapies for the treatment of cancer and infectious diseases.

New FDI Regime for Critical Infrastructure

The outlook for investing into infrastructure assets in 2021 and beyond remains promising in Germany. However, foreign investors need to consider that several EU Member States (specifically Germany) adopted sweeping revisions of their FDI control regimes. Although approval conditions are increasing, significant delays in timing remain relatively uncommon in European and German deals — but this might change going forward.

Latham & Watkins | Private Equity Market Study, Seventh Edition


The German federal government scrutinizes direct and indirect acquisitions of at least 10% of the voting rights of German companies operating in critical infrastructure, related software and services that manufacture or develop certain military-related products. For all other sectors, the 25% threshold remains in place, which means that notifying the government is voluntary. The definition of what constitutes critical infrastructure, and therefore constitutes a mandatory notification requirement, has been extended to include vaccine and antibiotics manufacturers, manufacturers of medical protective equipment, and manufacturers of medical goods for treating highly infectious diseases. An additional broadening of the scope of activities triggering a mandatory notification is expected for the first half of 2021.

Additionally, the latest amendments to the German FDI control regime provide for new gun-jumping rules, which raise the stakes for parties with inbound M&A transactions regarding information exchanges and pre-closing cooperation. As such, investors should develop coherent strategies, taking into account the various stand-still obligations under FDI control and merger control law in order to avoid the risk of ineffectiveness of a transaction, or even fines and criminal sanctions (For more on this subject, read Latham’s Client Alert).