M&A Transactions in Germany

At the beginning of discussions about a potential M&A transaction, the parties usually enter into a Confidentiality Agreement (also called Non-Disclosure Agreement or in short: NDA).

If the initial discussions are successful, the parties will set out in a Letter of Intent (LOI) the key parameters of the transaction as well as the key steps of the further acquisition process. We support you in the drafting and negotiation of the documents because this is where the essential course is set for the later negotiations, an efficient process and the terms of the transaction in the final agreements.

However, essential provisions are also agreed upon to protect the interests of the parties in the event of a failure of the negotiations, which is especially crucial if the parties are competitors. Even at this stage, mistakes can jeopardize the success of an M&A transaction and lead to serious risks for the parties.

As a buyer, you should pay particular attention to the due diligence when acquiring a company. This involves examining the target company from a tax and legal perspective, among other things, in order to determine the suitability of the target company for achieving the transaction objectives and to uncover any risks. Our experienced M&A advisors are happy to assist you in this process to ensure the success of the transaction and to avoid unpleasant surprises. 

But also the buyer should be supported by experienced lawyers during the due diligence process. It is about a professional due diligence process and the right handling of possible risks at the target company in order to avoid later liability of the seller and to ensure the appropriate protection of trade secrets.

Our team will also keep an eye on any consent requirements for the buyer or seller or for the transaction as a whole and similar obstacles in connection with a company acquisition in Germany.

In addition, aspects of

• civil law,
• corporate law,
• family law,
• public law, and
• anti-trust law

must be taken into account when providing advice on M&A transactions. This applies, for example, if in the case of the participation of private individuals the company to be sold represents the essential part of the assets of the seller, if permission for operating a company is linked to personal requirements or if the threshold values relevant under anti-trust laws are exceeded.

These two forms of company acquisition are characterized by special features of the parties involved. Both are conceivable in the form of an asset deal as well as a share deal.

In the case of a management buy-out (MBO), the company is acquired by its previous managers, whereas in the case of a management buy-in (MBI), the managers of an outside company seek management positions in the company to be purchased.

If several purchasers are involved in an MBO, the purchaser in practice is often an acquisition company created specifically for this purpose (a so-called Special Purpose Vehicle, SPV), which becomes the legal owner of the company to be purchased.

The reasons for the formation of such an SPV are manifold. Tax law aspects often play a role, but liability law aspects can also speak for the use of an SPV. As a rule, due diligence is not required in the case of an MBO and guarantees about the target company do not play a significant role from a contractual point of view.

Our lawyers have been advising on cross-border M&A transactions for decades, both foreign buyers and German sellers selling their businesses to foreign buyers. 

We are familiar with the legal and cultural differences that have to be bridged, as well as the special formalities that have to be observed. In the case of the acquisition of German companies by EU foreigners, special reporting obligations or even approval requirements may be necessary under German foreign trade law, which is based on an EU regulation on the so-called "screening of foreign direct investments (FDI)".

Mergers of companies can be carried out in accordance with the provisions of the German Transformation Act (Umwandlungsgesetz). For example, two legal entities can be merged into a third, newly created legal entity, whereby the shareholders of the original legal entities become shareholders of the newly created legal entity.

Parts of an enterprise, such as partial operations or individual departments, can be separated by means of a spin-off and transferred to a new legal entity. The transferring legal entity or its shareholders become shareholders of the new legal entity thus created.

Conversions, mergers and spin-offs can be carried out in connection with M&A transactions but can also be a means of intra-group restructuring under corporate law, either to merge several companies or to transfer individual divisions of a company into a separate company, whether to shield business risks, to give third parties an interest in the division or to prepare for the sale of a division or the rest of the company.

Within the EU and the European Economic Area, two or more legal entities can also be merged across national borders by way of a cross-border merger.

In the course of advising you on your M&A transaction, our M$A attorneys will inform you about the various options for the acquisition or sale of a business and suggest the most suitable one for your project.