What's going on?

Looks like all that alone time during lockdown was quite enough for Vonovia: the German real estate giant agreed to bring rival Deutsche Wohnen into the fold in a $22 billion acquisition.

What does this mean?

The residential real estate market is popping off across much of the world right now, and Germany is no exception. So it�s not surprising that Vonovia � the country�s biggest residential landlord � should be looking for a bigger slice of the strudel with its third attempted takeover of slightly smaller competitor Deutsche Wohnen.

Despite its size, Vonovia currently only controls less than 1% of Germany�s residential real estate market � or around 350,000 apartments. And considering half the country�s population rent rather than own, the opportunity for growth is massive. So is the deal, for that matter: it�s Europe�s biggest merger so far this year.

Why should I care?

For markets: This is an expensive neighborhood.

Vonovia�s bid for Deutsche Wohnen valued the company 18% higher than it was worth last week, so it�s no wonder that the firm�s stock price jumped 16% on Tuesday. But Vonovia�s investors were less impressed, sending its shares down 6%. That�s not an uncommon reaction to this sort of big-ticket deal: investors often worry that the company�s either overpaid for the acquisition, is taking on too much debt, or will struggle to integrate the new firm successfully.

The bigger picture: Germany�s big summer blowout.

Vonovia�s announcement comes just as things are looking up for Europe�s biggest economy: a major monthly survey of 9,000 German companies on Tuesday showed business morale at its highest in two years (tweet this). It�s the latest sign that economic activity is picking up across the continent.