The main piece of legislation regulating public M&A transactions in Germany is the ARC Law. Oversight functions are vested in two agencies: FCO & BaFin.
Conducting public M&A deals in Germany requires adherence to M&A regulation if:
- no less than twenty five percent of shares is purchased;
- purchasers buy assets of a German PLC;
- purchasers acquire control over a company;
- an agreement is concluded whereby one of them can exercise substantial influence over the other competition wise.
Notifying the FCO is a prerequisite for Initiating a takeover (or merger) of German public companies. A notification must be sent if one of the following criteria is met:
- a total turnover of companies participating in a dal is in excess of five hundred million euros;
- a total turnover of one company is in excess of twenty five million euros (in Germany);
Those seeking to conclude an M&A deal in Germany should keep in mind that local M&A legislation also applies to deals concluded outside Germany or those of them in which non-resident companies participate. However, to qualify for one, an M&A deal must have a substantial effect on a particular market in Germany.
Which Information Must be Disclosed?
There’s no publicly accessible database containing information on agreements related to conclusion of M&A deals. If conducting an M&A transaction in Germany requires approval of both companies’ stakeholders, the latter should be provided with sufficient information pertaining to a deal. Hence, M&A agreements & other relevant documentation are to be made available to stakeholders at all times.
Bidders wishing to initiate an M&A transaction in Germany must publish a document disclosing details of an upcoming transaction, and more specifically, their intentions with respect to a company they’re going to purchase, as well as its senior managers & personnel.
Issuing securities that are listed on a stock exchange(s) requires placing an ad in a local newspaper (this requirement is applicable to M&A deals funded through issuing shares).
If BaFin-established thresholds are reached (i.e. if more than three, five, ten, fifteen, twenty, twenty five, thirty, fifty or seventy five percent of shares are purchased), companies seeking to purchase a JSC in the Federal Republic of Germany must notify BaFin. Failure to send a notification entails invalidation of rights assigned to the shares. If there’s been a deliberate violation of notification requirements, invalidation shall remain in place for a 6-month period following submission of a notification. Non-compliance with the requirements for acquiring an AG in Germany may entail a fine:
- two million euros (for individuals);
- ten million euros or five percent of the turnover of a company in a financial year (for legal entities).
Sanctions along with violators’ names will be posted on the official website of BaFin.
Shareholders meeting or exceeding a threshold of ten percent must notify issuers of the goal of acquiring AG shares in Germany & the origin of funds used for acquiring a company. Once they’ve been provided with the above information, issuers are to render it publicly available without any delay. This rule isn’t applicable if:
- an issuer’s charter has a provision whereby shareholders aren’t obliged to inform issuers;
- purchasing shares of a German JSC is done by a fund established for offsetting consequences of a financial meltdown;
- a publicly made offer results in reaching a threshold.
Upon reaching a threshold of five thousand euros, BoD members & personnel of publicly traded companies must disclose information related to selling or buying BaFin shares. Deals like these must be reported in media outlets whose coverage extends to the entire territory of Europe, entered into a company register & included in a document published annually on a regulator’s website.
Considering purchasing a PLC in Germany? Need advice on the regulation of M&A transactions in Germany? Why not contact IQ Decision UK?