M&A of AGs in the Federal Republic of Germany are divided into 3 main types:
- reorganizations & M&As;
- cooperation models.
Reorganization & M&A of German AGs
Such a transaction is carried out by:
- a transfer of assets of one company to the other or a transfer of assets of 2 companies to a newly formed one;
- a separate transfer of liabilities/assets to the other enterprise;
- transferring assets for cash;
- changing an organizational & legal form.
Germany: Acquiring a PLC’s Stocks & Assets
Stocks of listed PLCs may be purchased from shareholders, through a stock exchange or through a publicly held takeover. Acquiring AGs’ stakes in Germany is also possible through making a tender bid or making an offer for an exchange of stakes (both options are also possible). That said, non-German bidders offering shares must place them on a market in the EEA.
Purchasing a PLC’s assets in Germany can be funded with either stocks or cash. That said, buyers of the main assets of a company (or its part) will be considered to give their consent to a transfer of contracts of its personnel & have to meet more stringent criteria.
To conclude public M&A deals in the Federal Republic of Germany, participants must use special acquisition mechanisms.
There’s quite a few cooperation models - from JV agreements to distribution, agency, franchise & licensing agreements.
Germany: Concluding International M&A Deals
Those looking to conclude an international M&A deal of German PLCs should keep in mind that such deals can be structured as acquisitions or mergers. German enterprises can merge with non-resident enterprises registered in the EU (and vice versa). In addition, such companies are to have a 2-tier management structure, including BoDs & supervisory boards.
Those considering concluding an international M&A deal in Germany should take into account a number of tax considerations. Conducting cross-border transactions by way of reorganization doesn’t necessarily involve paying taxes. To avoid taxation, participating organizations must be based in Europe & ensure that the right to taxation of hidden reserves isn’t limited. An identical principle can be applied to German companies seeking to migrate abroad. However, it isn’t applicable to entities unregistered in the EEA & EU.
Registering German insurance companies & obtaining a license of a German banking institution requires compliance with special rules. For instance, acquiring a stake in German banking institutions or insurance companies exceeding twenty, thirty or fifty percent requires notifying a relevant regulator. In some extreme circumstances, an acquisition may be prohibited from happening.
Concluding an M&A deal in the German broadcasting sector requires notifying an agency that issued a broadcasting license. Purchasing a national broadcasting corporation requires getting an authorization from the KEK. The latter is charged with making sure that an M&A deal doesn’t result in a broadcaster exerting excessive influence on public opinion. Foreign investment in German defense enterprises exceeding ten percent can be prohibited by the government.
Purchasing German PLCs
Obtaining permission to purchase stocks of AGs in Germany depends on their type & whether they were purchased from stakeholders, bought on a stock exchange or subscribed to because of an increase in capital. If a structure of a deal has its own specifics, concluding an M&A agreement in Germany may require providing additional documents.
Starting a public tender in Germany requires drafting a document in accordance with tender legislation.
Buying German companies’ stocks via public M&As requires submitting an offer to BaFin. Bidders don’t have to pay a stamp duty; that said, concluding an agreement on M&A of public enterprises in the Federal Republic of Germany requires it to be notarized. Depending on the value of a specific transaction, notary fees can vary. There may be other fees if tender-related documentation must be translated into English. Concluding an agreement with companies that own immovable property in Germany (directly or indirectly) may require paying a tax on transfer of immovable property.
Considering purchasing a PLC in the Federal Republic of Germany? Need advice on regulation of public M&A in the Federal Republic of Germany? Please consider contacting IQ Decision UK.