During the economic downturn that occurs in many developed countries due to Covid-19, there is a trend towards an increase in the number of mergers and acquisitions of companies. M&A deals in Germany is also increasing, as there is an active sale of “problem” companies at reduced prices, and corporations are actively getting rid of non-core assets. In addition, there is an activity of private investors in order to capitalize assets, whose value has decreased. It is impossible to predict the optimal time to buy or merge a company, but if you decide to do it now, then this blog post may be useful to you, as it is devoted to the specifics of conducting private M&A in Germany.
Deal structure
Mergers and acquisitions can and should be viewed not only as a way to exit the project, but also as an important tool for business development. For the buying side, M&A can be a long-term strategy option.
The vast majority of acquisitions by private companies in Germany are structured as equity deals which are simpler than asset deals.
The share transaction details vary depending on whether the target company is structured as:
- limited liability company (GmbH);
- unregistered joint-stock corporation (AG);
- limited liability partnership.
A stock transaction gives the buyer confidence that he is buying the business. In the case of an asset transaction, the transfer procedure can be more complicated, since German law generally does not provide for the transfer of the business as a whole.
If you intend to conduct a merger in Germany, please keep in mind that promotions are not uncommon for mid- and large-cap acquisitions.
After a merger, the complexity of the organization increases dramatically, which can lead to some corporate and legal issues.
In Germany, there is no specific law governing private acquisitions and sales. General provisions of civil law on the purchase of goods is applied for the legal regulation of mergers and acquisitions in Germany. However, these provisions are not binding, so that the deal participants can negotiate.
With the exception of antitrust considerations and foreign investment controls, and supervision of registered German banks, insurance, aviation and media companies, government authorities cannot influence or restrict the completion of business deals based on legal considerations.
Due diligence
As a rule, full due diligence of a German company includes an examination and thorough analysis of:
- corporate issues;
- financial agreements;
- employment and pensions;
- real estate;
- protection of IP rights in Germany;
- data protection;
- environmental regulation.
In some cases, it is not necessary to conduct a full check on all points. The necessary and sufficient DueD level can be determined taking into account the exact purpose of the due diligence of a German company.
If you have any questions on this topic, do not hesitate to contact us in a convenient way. Legal experts of our company are ready to provide the necessary consulting and accompanying services in the implementation of mergers and acquisitions in the EU.
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