GERMANY Trends and Developments Contributed by: Leif Gösta Gerling and Matthias Krämer, LPA
of such participation models, which were previously not preferred in Germany. In view of the steadily growing but also increasingly stringent regulatory framework surrounding the estab - lishment of JVs, legal and tax advice prior to their for - mation will continue to be of key importance and will become increasingly significant in order to guide the JV parties appropriately through the applicable pro - visions. Moreover, it will be necessary to anticipate that the establishment of JVs – particularly those with foreign connections to non-EU countries – will require more time for preparatory review. The “signing” and “closing” schedules of the parties involved should be adjusted or calculated accordingly. Conclusion While JVs have always been an effective means of pooling financial resources, minimising risks, trans - ferring knowledge, entering new markets and over - coming outdated internal structures, their importance has grown in recent years. This trend is expected to continue, based primarily on two observable develop - ments, as outlined at the outset of this article. On the one hand, it is becoming increasingly difficult to keep track of and navigate national and suprana - tional regulations, so that it often seems more attrac - tive for international market participants to join forces with an existing local market participant on a perma - nent or project-related basis, even if only temporarily, in order to benefit from their market experience and market familiarity. In conjunction with this, the regula - tory requirements for “traditional” company acquisi - tions are becoming increasingly comprehensive and complex. This is also noticeable in the consulting practice. Con - ducting due diligence is no longer limited to the so- called traditional areas, but now typically and routinely also covers topics such as data protection, FDI, FSR, ESG, sustainability, supply chains, reporting obliga - tions, etc, depending on the parties involved with var -
ying emphasis. As a result, establishing a JV structure is often a real alternative to the “traditional M&A deal”. For this reason, the regulatory landscape favours the establishment of JVs. However, it should not be forgotten that the regulatory requirements for establishing JVs are also becoming increasingly complex. It remains to be seen whether the increase in requirements for establishing JVs will make traditional transactions more attractive again at some point. At present, this does not appear to be the case. Secondly, the tasks to be accomplished are becoming increasingly complex and expensive, so that only a few companies, if any, have the financial and techno - logical resources to tackle large projects on their own. The establishment of JVs enables these tasks to be accomplished more efficiently, as the capital required can be allocated among multiple parties, and any lack of expertise, experience or cutting-edge technologies can also be pooled within a JV, thereby allowing for diversification and expansion of the range of services offered. The capital investment required to establish a JV is also significantly lower. Unlike the acquisition of a company, which usually requires a much higher capi - tal investment, the capital injection for a JV can be homeopathic and occasion related. This generates interest rate advantages, and probably increases the ROI. To summarise, the increase in JVs has both a legal and an economic component. Joint efforts will prob - ably be essential in order to overcome the social and economic challenges that will arise in the upcoming years, which are increasing in significance, impact and scale. This circumstance is likely to contribute to JVs remaining an effective means for domestic and global players to keep pace and meet these challenges. The “market” for JVs is therefore expected to remain sta - ble or even increase in share.
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