The PropTech sector is developing rapidly and fundamentally changing the construction and real estate industry. However, as the market matures, the pressure to consolidate is increasing. Real estate companies have to deal with shrinking margins, increasing regulatory requirements and the challenge of scaling sustainable business models profitably. In this context, M&A (mergers and acquisitions) plays a decisive role. But why are mergers or sales often the best solution for PropTechs and established real estate companies? What opportunities and challenges arise? This article shows the current developments in the market and why M&A is becoming increasingly important.

The PropTech sector in figures: Growth and consolidation pressure

According to the blackprint PropTech Report 2024, there were 1,264 active PropTech start-ups in Germany – a growth of 41% compared to the previous year. Despite this growth, the pressure to consolidate is increasing and M&A is increasingly seen as an alternative to organic growth.

The main drivers are

• Higher profitability requirements: Many PropTechs offer innovative solutions but struggle to be commercially viable in the long term.
• Digitalization of the real estate industry: Established companies recognize the need to integrate digital technologies to remain competitive.
• Rising number of transactions: M&A help to integrate digital solutions into existing business models more quickly.

M&A market: changes among investors

Looking at M&A transactions, there is a clear shift in investors. While strategic investors remain stable at 18 deals per year, financial investors have increased their deals from 12 in 2023 to 20 in 2024 – a growth of 67%. For the first time, financial investors are overtaking strategic investors, demonstrating that the capital market has recognized the potential of PropTech consolidation. The most active financial investors include 468 Capital, Wecken & Cie and FJ Labs, which are expanding their presence in the market with several investments, such as in assetbird, Kugu and Evernest. This illustrates the increasing attractiveness of PropTech acquisitions and the shift in the M&A market.

Investment strategies have also changed. Capital is still available, but it is being made available specifically for AI, automation and ESG-driven business models. While seed and early-stage funding remains stable, Series B+ companies are finding it increasingly difficult to convince investors. As a result, M&A is increasingly seen as the preferred exit strategy for late-stage start-ups. In addition, there is a growing focus on consolidation in the market as companies focus on improving efficiency. Investments in energy efficiency, automation and AI technologies are at the heart of this and are being encouraged.

Why M&A makes sense for PropTechs

For many PropTech start-ups, a merger or sale may be the best way to achieve long-term success.

The main reasons are:

• Scaling through synergies: A merger with an established real estate company facilitates access to sales structures and customer segments.
• Financial security: Late financing rounds are more difficult to realize, so an exit through M&A is a stable alternative.
• Regulatory support: ESG regulation is driving the industry forward. PropTechs benefit from the experience and resources of established companies to meet the requirements.

M&A as a strategy for real estate companies

M&A also offers significant benefits to traditional construction and real estate companies:

• Technological acceleration: The acquisition of Neubau Kompass by Scout24 enables innovative digital solutions for the purchase and sale of new-build projects.
• Expansion of the business model in energy efficiency: TPG’s acquisition of Aareon strengthens its digital infrastructure and investments in sustainable real estate solutions.
• Competitive advantages: Sprengnetter’s acquisition of 21st Real Estate expands its data expertise in the commercial real estate sector and strengthens its market position.

Conclusion: Consolidation as a growth driver for the PropTech sector

The PropTech sector is at a pivotal point. While innovation continues to drive growth, the focus on profitability and market stability is increasing.

M&A offers great opportunities for both start-ups and established companies:

• PropTechs benefit from capital, market structures and regulatory support.
• Established real estate companies can integrate digital innovations faster and more efficiently.

With a clear strategy and professional support, M&A can not only ensure financial stability, but also create sustainable competitive advantages. The next few years will show which companies will make the most of the opportunities offered by consolidation – and who will emerge as the winners.